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Dynamic coordination via organizational routines

  • Andreas Blume

    (University of Pittsburgh)

  • April M. Franco

    (Rotman School of Management, University of Toronto)

  • Paul Heidhues

    (ESMT European School of Management and Technology)

We investigate dynamic coordination among members of a problem-solving team who receive private signals about which of their actions are required for a (static) coordinated solution and who have repeated opportunities to explore different action combinations. In this environment ordinal equilibria, in which agents condition only on how their signals rank their actions and not on signal strength, lead to simple patterns of behavior that have a natural interpretation as routines. These routines partially solve the team's coordination problem by synchronizing the team's search efforts and prove to be resilient to changes in the environment by being ex post equilibria, to agents having only a coarse understanding of other agents' strategies by being fully cursed, and to natural forms of agents' overconfidence. The price of this resilience is that optimal routines are frequently suboptimal equilibria.

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File URL: http://static.esmt.org/publications/workingpapers/ESMT-11-10.pdf
File Function: First version, 2011
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Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-11-10.

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Length: 58 pages
Date of creation: 06 Sep 2011
Date of revision:
Handle: RePEc:esm:wpaper:esmt-11-10
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  1. Robert S. Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Levine's Working Paper Archive 661465000000000249, David K. Levine.
  2. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
  3. John Duffy & Andreas Blume & April Franco, 2007. "Decentralized Organizational Learning: An Experimental Investigation," Working Papers 310, University of Pittsburgh, Department of Economics, revised Jul 2008.
  4. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  5. Jacques Cremer & Luis Garicano & Andrea Prat, 2006. "Language and the Theory of the Firm," Levine's Bibliography 784828000000000373, UCLA Department of Economics.
  6. Thomas Wiseman, 2005. "A Partial Folk Theorem for Games with Unknown Payoff Distributions," Econometrica, Econometric Society, vol. 73(2), pages 629-645, 03.
  7. Andreas Blume & Paul Heidhues, 2003. "Private Monitoring in Auctions," CIG Working Papers SP II 2003-14, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  8. O. Gossner & N. Vieille, 2000. "Strategic Learning in Games with Symmetric Information," THEMA Working Papers 2000-27, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  9. Andreas Blume & April Franco, 2002. "Learning from failure," Staff Report 299, Federal Reserve Bank of Minneapolis.
  10. Blume, Andreas & Franco, April Mitchell, 2007. "Decentralized learning from failure," Journal of Economic Theory, Elsevier, vol. 133(1), pages 504-523, March.
  11. Andreas Blume & John Duffy, 2004. "Organizational Learning: An Experimental Investigation," 2004 Meeting Papers 617, Society for Economic Dynamics.
  12. Sylvain Chassang, 2010. "Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 448-65, March.
  13. David A. Miller, 2005. "The dynamic cost of ex post incentive compatibility in repeated games of private information," Game Theory and Information 0510002, EconWPA.
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