Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment
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Malenko_Timing decisions.pdf
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Author(s)
Grenadier, Steven R.
Malenko, Andrey
Malenko, Nadya
Date Issued
May 16, 2017
Journal
American Economic Review
Publisher
American Economic Association
Citation
Grenadier, Steven R.; Malenko, Andrey and Malenko, Nadya. “Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment.” American Economic Review 106, no. 9 (September 2016): 2552–2581. © 2016 American Economic Association
Version
Final published version
Abstract
We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affects the agent's ability to credibly communicate information. When the agent favors late decision making, full information revelation often occurs. In this case, centralized decision making, where the principal retains authority and communicates with the agent, implements the optimal decision-making rule. When the agent favors early decision making, communication is partial, and the optimal decision-making rule is not implemented. Delegation adds value when the bias is for early decision making, but not for late decision making.
MIT Department
Sloan School of Management
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.20150416
