Organizational Languages

Abstract

The paper is concerned with communication within a team of players trying to coordinate in response to information dispersed among them. The problem is non-trivial because they cannot communicate all information instantaneously, but have to send longer or shorter sequences of messages, using coarse codes. We focus on the design of these codes and show that members may gain compatibility advantages by using identical codes, and that this can support the existence of several, more or less efficient, symmetric equilibria. Asymmetric equilibria exist if coordination across different sets of members is of differing importance, and fewer symmetric equilibria exist if the members' local environments are sufficiently heterogeneous. The results are consistent with the stylized fact that firms differ even within industries, and that coordination between divisions is harder than coordination inside divisions.

JEL Classification: L2, M1