Communication in Settings with No. Transfers
Consider a setting commonly found in intrafirm, regulatory, and political relationships wherein an uninformed decision maker, attempting to elicit information from an informed party affected by his decision, is unable to use transfers. This article examines whether both parties will agree on the introduction of communication-based organizational structures; results in prior research suggest they will. In contrast we demonstrate that when there is enough disagreement between the two parties, introducing communication benefits the decision maker but leads to a loss for the informed party. This result holds both when the decision maker can commit to a decision rule (as in Holmstom (1977)) and when he cannot (as in Crawford and Sobel (1982)). We also show that in the commitment case, with enough disagreement, the optimal communication-based decision rule is discontinuous. Our results suggest a possible rationale for observed legal and regulatory limitations on the information decision makers can elicit from other parties, as well as for attempts by various parties to avoid preplay communication.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (1991)
Issue (Month): 2 (Summer)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Christensen, 1981. "Communication in Agencies," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 661-674, Autumn.
- Laffont, Jean-Jacques & Tirole, Jean, 1986.
"Using Cost Observation to Regulate Firms,"
Journal of Political Economy,
University of Chicago Press, vol. 94(3), pages 614-641, June.
- Dominique M. Demougin, 1989. "A Renegotiation-Proof Mechanism for a Principal-Agent Model with Moral Hazard and Adverse Selection," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 256-267, Summer.
- R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
- Picard, Pierre, 1987.
"On the design of incentive schemes under moral hazard and adverse selection,"
Journal of Public Economics,
Elsevier, vol. 33(3), pages 305-331, August.
- Picard Pierre, 1986. "On the design of incentive schemes under moral hazard and adverse selection," CEPREMAP Working Papers (Couverture Orange) 8602, CEPREMAP.
- Robert Gibbons & Joseph Farrell, 1988.
"Cheap Talk Can Matter in Bargaining,"
482, Massachusetts Institute of Technology (MIT), Department of Economics.
- Joseph Farrell and Robert Gibbons., 1988. "Cheap Talk Can Matter in Bargaining," Economics Working Papers 8863, University of California at Berkeley.
- Farrell, Joseph & Gibbons, Robert, 1988. "Cheap Talk Can Matter in Bargaining," Department of Economics, Working Paper Series qt3qz786xq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- David P. Baron & David Besanko, 1987. "Monitoring, Moral Hazard, Asymmetric Information, and Risk Sharing in Procurement Contracting," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 509-532, Winter.
- Gilligan, Thomas W & Krehbiel, Keith, 1987. "Collective Decisionmaking and Standing Committees: An Informational Rationale for Restrictive Amendment Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 3(2), pages 287-335, Fall.
- M. Rabin, 2010.
"Communication Between Rational Agents,"
Levine's Working Paper Archive
539, David K. Levine.
- Reichelstein, Stefan, 1984. "Smooth versus discontinuous mechanisms," Economics Letters, Elsevier, vol. 16(3-4), pages 239-242.
- Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
- Pitchik, Carolyn & Schotter, Andrew, 1987. "Honesty in a Model of Strategic Information Transmission," American Economic Review, American Economic Association, vol. 77(5), pages 1032-1036, December.
- Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
- V. Crawford & J. Sobel, 2010.
"Strategic Information Transmission,"
Levine's Working Paper Archive
544, David K. Levine.
- Melumad, Nahum D. & Reichelstein, Stefan, 1989. "Value of communication in agencies," Journal of Economic Theory, Elsevier, vol. 47(2), pages 334-368, April.
- Steven A. Matthews, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 347-369.
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:22:y:1991:i:summer:p:173-198. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.