Information Sharing and Incentives in Organizations

Abstract

We study an organization, consisting of a manager and a worker, whose success depends on its ability to estimate a payoff-relevant but unknown parameter. If the manager has private information about this parameter, she has an incentive to conceal it from the worker in order to motivate him to search for additional information. If she could commit to an information-sharing policy, the manager would share her information more than under no commitment, though less than would be efficient. Further results on the effects of managerial ability, and on the interaction between managerial and worker abilities, are also derived.

Keywords: Information Non-Disclosure, Expert Evaluation, Agency Costs, Time-Inconsistency Problem

JEL Classification: D21, D82, L23