Efficient Communication in Organizations

TL;DR

This paper identifies a simple, robust communication protocol that efficiently resolves information asymmetries in organizations, enhancing decision-making and reducing wasteful influence activities.

Contribution

It introduces a unique, efficient communication protocol with a closed-form characterization, robust to collusion and free from unnecessary complexities.

Findings

Only one protocol is efficient and robust

The protocol always induces efficient equilibria

A closed-form characterization of equilibria is provided

Abstract

This paper studies the organization of communication between biased senders and a receiver. Senders can misreport their private information at a cost. Efficiency is achieved by clearing information asymmetries without incurring costs. Results show that only one communication protocol is efficient, robust to collusion, and free from unnecessary complexities. This protocol has a simple, adversarial, and public structure. It always induces efficient equilibria, for which a closed-form characterization is provided. The findings are relevant for the design of organizations that seek to improve decision-making while limiting wasteful influence activities.