We examine centralized versus decentralized decision making when experience of agents is private information and communication is necessary to learn from others. An agent has reputational concerns and his market may or may not observe what the other agent chooses (global versus local markets). With decentralized decision making, agents' willingness to communicate depends heavily on what a market observes. Strikingly, less communication may improve welfare. If markets are global, centralization outperforms decentralization as it makes communication possible, and communication is informative for any finite degree of conflict among agents and with the center. (JEL D60, D82, D83)
Swank, Otto H., and Bauke Visser.
"Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns."
American Economic Journal: Microeconomics,
Welfare Economics: General
Asymmetric and Private Information; Mechanism Design
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness