Dynamic Coordination Via Organizational Routines

64 Pages Posted: 6 Sep 2011

See all articles by Andreas Blume

Andreas Blume

University of Pittsburgh - Department of Economics

April Franco

University of Toronto - Rotman School of Management; University of Toronto at Scarborough - Division of Management

Paul Heidhues

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Date Written: September 6, 2011

Abstract

We investigate dynamic coordination among members of a problem-solving team who receive private signals about which of their actions are required for a (static) coordinated solution and who have repeated opportunities to explore different action combinations. In this environment ordinal equilibria, in which agents condition only on how their signals rank their actions and not on signal strength, lead to simple patterns of behavior that have a natural interpretation as routines. These routines partially solve the team's coordination problem by synchronizing the team's search efforts and prove to be resilient to changes in the environment by being ex post equilibria, to agents having only a coarse understanding of other agents' strategies by being fully cursed, and to natural forms of agents' overconfidence. The price of this resilience is that optimal routines are frequently suboptimal equilibria.

Keywords: coordination games, organizational routines, decentralized information, ex-post equilibria, cursed equilibria, multi-agent learning, rational learning

JEL Classification: C73, D23

Suggested Citation

Blume, Andreas and Franco, April and Heidhues, Paul, Dynamic Coordination Via Organizational Routines (September 6, 2011). ESMT Working Paper No. 11-10. Available at SSRN: https://ssrn.com/abstract=1923151 or http://dx.doi.org/10.2139/ssrn.1923151

Andreas Blume

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

April Franco

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

University of Toronto at Scarborough - Division of Management ( email )

1265 Military Trial
Scarborough, Ontario M1C 1A4
Canada

Paul Heidhues (Contact Author)

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

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