Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282048 
Year of Publication: 
2022
Series/Report no.: 
Discussion Paper No. 356
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
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.
Subjects: 
agency
aggregate information
organization design
JEL: 
D86
L23
L25
Document Type: 
Working Paper

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