Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment
We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affects the agent's ability to credibly communicate information. When the agent favors late decision makin...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
American Economic Association
2017
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| Online Access: | http://hdl.handle.net/1721.1/109130 https://orcid.org/0000-0002-6429-850X |
| _version_ | 1826206927089041408 |
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| author | Grenadier, Steven R. Malenko, Andrey Malenko, Nadya |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Grenadier, Steven R. Malenko, Andrey Malenko, Nadya |
| author_sort | Grenadier, Steven R. |
| collection | MIT |
| description | We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affects the agent's ability to credibly communicate information. When the agent favors late decision making, full information revelation often occurs. In this case, centralized decision making, where the principal retains authority and communicates with the agent, implements the optimal decision-making rule. When the agent favors early decision making, communication is partial, and the optimal decision-making rule is not implemented. Delegation adds value when the bias is for early decision making, but not for late decision making. |
| first_indexed | 2024-09-23T13:40:46Z |
| format | Article |
| id | mit-1721.1/109130 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T13:40:46Z |
| publishDate | 2017 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/1091302022-09-28T15:28:02Z Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment Grenadier, Steven R. Malenko, Andrey Malenko, Nadya Sloan School of Management Malenko, Andrey We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affects the agent's ability to credibly communicate information. When the agent favors late decision making, full information revelation often occurs. In this case, centralized decision making, where the principal retains authority and communicates with the agent, implements the optimal decision-making rule. When the agent favors early decision making, communication is partial, and the optimal decision-making rule is not implemented. Delegation adds value when the bias is for early decision making, but not for late decision making. 2017-05-16T18:53:08Z 2017-05-16T18:53:08Z 2017-05-16 Article http://purl.org/eprint/type/JournalArticle 0002-8282 1944-7981 http://hdl.handle.net/1721.1/109130 Grenadier, Steven R.; Malenko, Andrey and Malenko, Nadya. “Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment.” American Economic Review 106, no. 9 (September 2016): 2552–2581. © 2016 American Economic Association https://orcid.org/0000-0002-6429-850X en_US http://dx.doi.org/10.1257/aer.20150416 American Economic Review Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association American Economic Association |
| spellingShingle | Grenadier, Steven R. Malenko, Andrey Malenko, Nadya Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment |
| title | Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment |
| title_full | Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment |
| title_fullStr | Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment |
| title_full_unstemmed | Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment |
| title_short | Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment |
| title_sort | timing decisions in organizations communication and authority in a dynamic environment |
| url | http://hdl.handle.net/1721.1/109130 https://orcid.org/0000-0002-6429-850X |
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