IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/6357.html
   My bibliography  Save this paper

Protocol Design and (De-)Centralization

Author

Listed:
  • Grüner, Hans Peter

Abstract

Should privately informed agents with diverging interests act independently or should they commit to a mechanism? This paper analyzes different communication and decision protocols when communication involves delay. It studies under which conditions agents should (i) choose their actions immediately and non-cooperatively, (ii) communicate and act independently or (iii) contract before receiving their information. Well informed agents with similar preferences do not contract or communicate. Communication is desirable when preferences are similar and individual signals are of intermediate quality. Contracting on a Bayesian mechanism only pays when agents' preferences are not too strongly correlated, when information quality is high, and when the cost of delay is sufficiently low. When the correlation is negative and large enough, the optimal contract does not involve any communication.

Suggested Citation

  • Grüner, Hans Peter, 2007. "Protocol Design and (De-)Centralization," CEPR Discussion Papers 6357, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6357
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=6357
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
    2. Grüner, Hans Peter & Schulte, Elisabeth, 2004. "Speed and Quality of Collective Decision-Making II: Incentives for Information Provision," CEPR Discussion Papers 4397, C.E.P.R. Discussion Papers.
    3. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    5. Green, Jerry R & Laffont, Jean-Jacques, 1987. "Posterior Implementability in a Two-Person Decision Problem," Econometrica, Econometric Society, vol. 55(1), pages 69-94, January.
    6. Mookherjee, D. & Reichelstein, S., 1996. "Budgeting and Hierarchical Control," Papers 71, Boston University - Industry Studies Programme.
    7. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization?," American Economic Review, American Economic Association, vol. 98(1), pages 145-179, March.
    8. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    9. Nahum Melumad & Dilip Mookherjee & Stefan Reichelstein, 1997. "Contract Complexity, Incentives, and the Value of Delegation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 257-289, June.
    10. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 809-839.
    11. Grüner, Hans Peter, 2007. "Information Technology, Efficient Restructuring and the Productivity Puzzle," CEPR Discussion Papers 6109, C.E.P.R. Discussion Papers.
    12. Jacques Cremer, 1980. "A Partial Theory of the Optimal Organization of a Bureaucracy," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 683-693, Autumn.
    13. repec:adr:anecst:y:1992:i:25-26 is not listed on IDEAS
    14. Schulte, Elisabeth & Peter Gruner, Hans, 2007. "Speed and quality of collective decision making: Imperfect information processing," Journal of Economic Theory, Elsevier, vol. 134(1), pages 138-154, May.
    15. Meagher, Kieron J & Orbay, Hakan & Van Zandt, Timothy, 2001. "Hierarchy Size and Environmental Uncertainty," CEPR Discussion Papers 2839, C.E.P.R. Discussion Papers.
    16. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
    17. Timothy Van Zandt, 1997. "Real-Time Hierarchical Resource Allocation," Discussion Papers 1231, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    18. Mathias Dewatripont & Jean Tirole, 2005. "Modes of Communication," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1217-1238, December.
    19. Prat, Andrea, 1997. "Hierarchies of Processors with Endogenous Capacity," Journal of Economic Theory, Elsevier, vol. 77(1), pages 214-222, November.
    20. Nahum D. Melumad & Dilip Mookherjee & Stefan Reichelstein, 1995. "Hierarchical Decentralization of Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 654-672, Winter.
    21. Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September.
    22. Orbay, Hakan, 2002. "Information Processing Hierarchies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 370-407, August.
    23. Philippe Jehiel, 1999. "Information Aggregation and Communication in Organizations," Management Science, INFORMS, vol. 45(5), pages 659-669, May.
    24. Lulfesmann, Christoph, 2002. "Central governance or subsidiarity: A property-rights approach to federalism," European Economic Review, Elsevier, vol. 46(8), pages 1379-1397, September.
    25. repec:bla:joares:v:35:y:1997:i:2:p:129-155 is not listed on IDEAS
    26. Roy Radner & Timothy Van Zandt, 1992. "Information Processing in Firms and Returns to Scale," Annals of Economics and Statistics, GENES, issue 25-26, pages 265-298.
    27. Kieron Meagher & Timothy Van Zandt, 1998. "Managerial costs for one-shot decentralized information processing," Review of Economic Design, Springer;Society for Economic Design, vol. 3(4), pages 329-345.
    28. repec:adr:anecst:y:1992:i:25-26:p:13 is not listed on IDEAS
    29. Timothy Van Zandt, 1998. "The scheduling and organization of periodic associative computation: Efficient networks," Review of Economic Design, Springer;Society for Economic Design, vol. 3(2), pages 93-127.
    30. Melumad, Nahum & Mookherjee, Dilip & Reichelstein, Stefan, 1992. "A theory of responsibility centers," Journal of Accounting and Economics, Elsevier, vol. 15(4), pages 445-484, December.
    31. Ilya Segal, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 57-82.
    32. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-1146, September.
    33. Timothy Van Zandt, 1997. "The scheduling and organization of periodic associative computation: Essential networks," Review of Economic Design, Springer;Society for Economic Design, vol. 3(1), pages 15-27.
    34. Gerardi, Dino & Yariv, Leeat, 2007. "Deliberative voting," Journal of Economic Theory, Elsevier, vol. 134(1), pages 317-338, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    decentralization; EU; mechanism design; Protocol design; Turkey;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6357. 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: (). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.