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Dynamic coordination via organizational routines

Author

Listed:
  • Andreas Blume

    (University of Pittsburgh)

  • April M. Franco

    (Rotman School of Management, University of Toronto)

  • Paul Heidhues

    (ESMT European School of Management and Technology)

Abstract

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.

Suggested Citation

  • Andreas Blume & April M. Franco & Paul Heidhues, 2011. "Dynamic coordination via organizational routines," ESMT Research Working Papers ESMT-11-10, ESMT European School of Management and Technology.
  • Handle: RePEc:esm:wpaper:esmt-11-10
    as

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    File URL: http://static.esmt.org/publications/workingpapers/ESMT-11-10.pdf
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    References listed on IDEAS

    as
    1. Blume, Andreas & Franco, April Mitchell, 2007. "Decentralized learning from failure," Journal of Economic Theory, Elsevier, vol. 133(1), pages 504-523, March.
    2. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
    3. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 373-407.
    4. Sylvain Chassang, 2010. "Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 448-465, March.
    5. Blume, Andreas & Heidhues, Paul, 2006. "Private monitoring in auctions," Journal of Economic Theory, Elsevier, vol. 131(1), pages 179-211, November.
    6. Gossner, Olivier & Vieille, Nicolas, 2003. "Strategic learning in games with symmetric information," Games and Economic Behavior, Elsevier, vol. 42(1), pages 25-47, January.
    7. Andreas Blume & John Duffy, 2004. "Organizational Learning: An Experimental Investigation," 2004 Meeting Papers 617, Society for Economic Dynamics.
    8. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
    9. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, May.
    10. repec:pit:wpaper:382 is not listed on IDEAS
    11. Robert Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 337-365, September.
    12. David A. Miller, 2012. "Robust Collusion with Private Information," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 778-811.
    13. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, May.
    14. repec:cup:apsrev:v:92:y:1998:i:02:p:413-418_21 is not listed on IDEAS
    15. Thomas Wiseman, 2005. "A Partial Folk Theorem for Games with Unknown Payoff Distributions," Econometrica, Econometric Society, vol. 73(2), pages 629-645, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    coordination games; organizational routines; decentralized information; ex-post equilibria; cursed equilibria; multi-agent learning; rational learning;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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