Communication and Behavior in Organizations: An Experiment

65 Pages Posted: 12 Dec 2014 Last revised: 20 Mar 2018

See all articles by Piotr Evdokimov

Piotr Evdokimov

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica

Umberto Garfagnini

University of Surrey - School of Economics

Date Written: March 15, 2018

Abstract

We design a laboratory experiment to study behavior in a multidivisional organization facing a trade-off between coordinating its decisions across the divisions and meeting division-specific needs that are known only to the division managers. The managers communicate their private information through cheap talk. While the results show close to optimal communication, we also find systematic deviations from optimal behavior in how the communicated information is used. Specifically, subjects' decisions show worse than predicted adaptation to the needs of the divisions in decentralized organizations and worse than predicted coordination in centralized organizations. We show that the observed deviations disappear when uncertainty about the divisions' local needs is removed and discuss the possible underlying mechanisms.

Keywords: communication, coordination, decentralization, experiment

JEL Classification: C70, D03, C92

Suggested Citation

Evdokimov, Piotr and Garfagnini, Umberto, Communication and Behavior in Organizations: An Experiment (March 15, 2018). Available at SSRN: https://ssrn.com/abstract=2536507 or http://dx.doi.org/10.2139/ssrn.2536507

Piotr Evdokimov

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10370
Mexico

Umberto Garfagnini (Contact Author)

University of Surrey - School of Economics ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

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