Accept or Reject? An Organizational Perspective

Umberto Garfagnini, Marco Ottaviani, Peter Norman Sørensen

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    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.
    Original languageEnglish
    JournalInternational Journal of Industrial Organization
    Volume34
    Pages (from-to)66-74
    ISSN0167-7187
    DOIs
    Publication statusPublished - 2014

    Keywords

    • Information
    • Cheap Talk
    • Delegation
    • Voting

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