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Organizational coordination and costly communication with boundedly rational agents

Dietrichson, Jens LU and Jochem, Torsten (2014) In Comparative Institutional Analysis Working Paper Series 2014(1).
Abstract
How does costly communication affect organizational coordination? This paper develops a model of costly communication based on the weakest-link game and boundedly rational agents. Solving for the stochastically stable states, we find that communication increases the possibilities for efficient coordination compared to a setting where agents cannot communicate. But as agents face a trade-off between lowering the strategic uncertainty for the group and the costs of communication, the least efficient state is still the unique stochastically stable one for many parameter values. Simulations show that this is not just a long run phenomena, the stochastically stable state is the most frequent outcome also in the short run. Making communication... (More)
How does costly communication affect organizational coordination? This paper develops a model of costly communication based on the weakest-link game and boundedly rational agents. Solving for the stochastically stable states, we find that communication increases the possibilities for efficient coordination compared to a setting where agents cannot communicate. But as agents face a trade-off between lowering the strategic uncertainty for the group and the costs of communication, the least efficient state is still the unique stochastically stable one for many parameter values. Simulations show that this is not just a long run phenomena, the stochastically stable state is the most frequent outcome also in the short run. Making communication mandatory induces efficient coordination, whereas letting a team leader handle communication increases efficiency when the leader expects others to follow and has enough credibility. The results are broadly consistent with recent experimental evidence of communication in weakest-link games. (Less)
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author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
Organizational coordination, Commmunication, Stochastic stability, Bounded rationality, Simulation
in
Comparative Institutional Analysis Working Paper Series
volume
2014
issue
1
pages
35 pages
publisher
Research group on Comparative Institutional Analysis
language
English
LU publication?
yes
id
72fdaba5-1a35-49f4-9d13-28a0415a7b2b (old id 4446108)
date added to LUP
2014-05-20 16:18:34
date last changed
2016-04-16 08:23:54
@misc{72fdaba5-1a35-49f4-9d13-28a0415a7b2b,
  abstract     = {How does costly communication affect organizational coordination? This paper develops a model of costly communication based on the weakest-link game and boundedly rational agents. Solving for the stochastically stable states, we find that communication increases the possibilities for efficient coordination compared to a setting where agents cannot communicate. But as agents face a trade-off between lowering the strategic uncertainty for the group and the costs of communication, the least efficient state is still the unique stochastically stable one for many parameter values. Simulations show that this is not just a long run phenomena, the stochastically stable state is the most frequent outcome also in the short run. Making communication mandatory induces efficient coordination, whereas letting a team leader handle communication increases efficiency when the leader expects others to follow and has enough credibility. The results are broadly consistent with recent experimental evidence of communication in weakest-link games.},
  author       = {Dietrichson, Jens and Jochem, Torsten},
  keyword      = {Organizational coordination,Commmunication,Stochastic stability,Bounded rationality,Simulation},
  language     = {eng},
  note         = {Working Paper},
  number       = {1},
  pages        = {35},
  publisher    = {Research group on Comparative Institutional Analysis},
  series       = {Comparative Institutional Analysis Working Paper Series},
  title        = {Organizational coordination and costly communication with boundedly rational agents},
  volume       = {2014},
  year         = {2014},
}