The Organization of Expertise in the Presence of Communication
24 Pages Posted: 11 Feb 2010
Date Written: November 30, 2009
A decision-maker has to elicit information from informed multiple experts about a policy's value. The principal may prevent communication among the agents. However, it may be in the principal's interest to allow communication among them. I assume that communication allows synergies to emerge among the experts 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 the principal's point of view, when the advantage of synergies prevails over the collusion problem, communication dominates the no communication case. However, synergies will always prevail if the principal lets agents communicate with each other before they make their choices rather than after.
Keywords: information acquisition, communication, coordination, collusion, expertise, organization
JEL Classification: D81, D82, L23
Suggested Citation: Suggested Citation