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Information Gathering in Organizations: Equilibrium, Welfare, and Optimal Network Structure

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  • Antoni Calvo-Armengol
  • Joan de Marti Beltran

Abstract

We model an organization as a game in which all agents share a common decision problem and some level of coordination is necessary between individual actions. Agents have individual private information concerning the task they have to perform, and they share this private information through pairwise channels of communication. We analyze how this communication pattern, modeled by means of a network structure, affects individual behavior and aggregate welfare. In the unique equilibrium of this Bayesian game, each agent's optimal action depends on a properly defined knowledge index that measures how the aggregation of information helps him to infer higher-order beliefs about other's information after communication. Adding communication channels is not always beneficial for the organization because it can lead to mis-coordination. We single out the geometry of interagent communication links that the manager could implement in order to improve the organization's performance.

Suggested Citation

  • Antoni Calvo-Armengol & Joan de Marti Beltran, 2009. "Information Gathering in Organizations: Equilibrium, Welfare, and Optimal Network Structure," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 116-161, March.
  • Handle: RePEc:tpr:jeurec:v:7:y:2009:i:1:p:116-161
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    Citations

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    Cited by:

    1. Bergemann, Dirk & Morris, Stephen, 2017. "Belief-free rationalizability and informational robustness," Games and Economic Behavior, Elsevier, vol. 104(C), pages 744-759.
    2. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    3. Akerlof, Robert & Holden, Richard, 2017. "Network Capital," CEPR Discussion Papers 11763, C.E.P.R. Discussion Papers.
    4. Hagenbach, Jeanne & Koessler, Frédéric, 2016. "Full disclosure in decentralized organizations," Economics Letters, Elsevier, vol. 139(C), pages 5-7.
    5. Robert Akerlof & Richard Holden, 2016. "Movers and Shakers," The Quarterly Journal of Economics, Oxford University Press, vol. 131(4), pages 1849-1874.
    6. Takashi Ui & Yasunori Yoshizawa, 2013. "Radner's Theorem on Teams and Games with a Continuum of Players," Economics Bulletin, AccessEcon, vol. 33(1), pages 72-77.
    7. Keiichi Morimoto, 2009. "Optimal Structure of Monetary Policy Committees," Discussion Papers in Economics and Business 09-36-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Dec 2009.
    8. Wataru Tamura, 2012. "A Theory of Multidimensional Information Disclosure," ISER Discussion Paper 0828, Institute of Social and Economic Research, Osaka University.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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