The Organization of Expertise in the Presence of Communication
22 Pages Posted: 15 Dec 2009
Date Written: November 30, 2009
A decision-maker has to elicit information from multiple informed experts about a policy's value. The principal may prevent communication among agents. However, it may be in the principal's interest to allow communication among them. I assume that communication allows some synergies among experts to emerge but also opens the possibility of collusion among them. I study the optimal design of contracts focusing on the organization of expertise in the communication phase. I show that, from principal's point of view, when the advantages of the synergy's effects prevail over the collusion problem, communication dominates no communication. However, this will be always true, when the principal allows agents to communicate with each other before they make their effort choices instead of after.
Keywords: information acquisition, communication, coordination, collusion, expertise, organization
JEL Classification: D81, D82, L23
Suggested Citation: Suggested Citation