When Does Coordination Require Centralization ? ∗

  title={When Does Coordination Require Centralization ? ∗},
  author={Ricardo Alonso and Wouter Dessein},
This paper compares centralized and decentralized coordination when managers are privately informed and communicate strategically. We consider a multi-divisional organization in which decisions must be adapted to local conditions but also coordinated with each other. Information about local conditions is dispersed and held by selfinterested division managers who communicate via cheap talk. The only available formal mechanism is the allocation of decision rights. We show that a higher need for… CONTINUE READING
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