Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment
| Autor: | Steven R. Grenadier, Andrey Malenko, Nadya Malenko |
|---|---|
| Rok vydání: | 2016 |
| Předmět: |
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Economics and Econometrics 050208 finance Decision engineering Organizational economics Delegation Computer science business.industry media_common.quotation_subject 05 social sciences Principal (computer security) Decision rule Public relations R-CAST Microeconomics Cheap talk Business decision mapping 0502 economics and business Economics Product (category theory) 050207 economics business media_common |
| Zdroj: | American Economic Review. 106:2552-2581 |
| ISSN: | 0002-8282 |
| DOI: | 10.1257/aer.20150416 |
| Popis: | This paper develops a theory of how organizations make timing decisions. We consider a problem where an uninformed principal decides when to exercise an option and interacts with an informed but biased agent. This problem is common: examples include headquarters deciding when to close a plant, drill an oil well, or launch a product. Because time is irreversible, the direction of the agent’s bias is crucial for communication and allocation of authority. When the agent favors late exercise, centralized decision-making, where the principal retains authority and communicates with the agent, often features full information revelation but ine¢ cient delay. Delegation is never optimal in this case. In contrast, when the agent favors early exercise, communication under centralized decision-making is partial, while option exercise is unbiased or delayed. Delegation is optimal if the bias is small or delegation can be timed. Thus, delegating decisions such as plant closures is never optimal, while delegating decisions such as product launches may be optimal. |
| Databáze: | OpenAIRE |
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