Aggregate Information and Organizational Structures

Arbeitspapier

We study information flows in an organization with a top management (principal) and multiple subunits (agents) with private information that determines the organization's aggregate efficiency. Under centralization, eliciting the agents' private information may induce the principal to manipulate aggregate information, which obstructs an effective use of information for the organization. Under delegation, the principal concedes more information rent, but is able to use the agents' information more effectively. The trade-off between the organizational structures depends on the likelihood that the agents are efficient. Centralizing information flows is optimal when such likelihood is low. Delegation, by contrast, is optimal when it is high.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 356

Classification and Topics

• Classification: Wirtschaft ; Economics of Contract: Theory ; Organization of Production ; Firm Performance: Size, Diversification, and Scope
• Subject: agency ; aggregate information ; organization design

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Celik, Gorkem ; Shin, Dongsoo ; Strausz, Roland
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (where): München und Berlin
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/282048
• Last update: 10.03.2025, 11:45 AM CET