This paper compares the relative performance of different organizational structures for the decision of accepting or rejecting a project of uncertain quality. When the principal is uninformed and relies on the advice of an informed and biased agent, cheap-talk communication is persuasive and it is equivalent to delegation of authority, provided that the agent's bias is small. When the principal has access to additional private information, cheap-talk communication dominates both (conditional) delegation and more democratic organizational arrangements such as voting with unanimous consensus.

Accept or reject? An organizational perspective

OTTAVIANI, MARCO M.;
2014

Abstract

This paper compares the relative performance of different organizational structures for the decision of accepting or rejecting a project of uncertain quality. When the principal is uninformed and relies on the advice of an informed and biased agent, cheap-talk communication is persuasive and it is equivalent to delegation of authority, provided that the agent's bias is small. When the principal has access to additional private information, cheap-talk communication dominates both (conditional) delegation and more democratic organizational arrangements such as voting with unanimous consensus.
2014
U., Garfagnini; Ottaviani, MARCO M.; P. N., Sorensen
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3886518
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