Library Header Image
LSE Research Online LSE Library Services

When does coordination require centralization?

Alonso, Ricardo, Dessein, Wouter and Matouschek, Niko (2008) When does coordination require centralization? American Economic Review, 98 (1). pp. 145-179. ISSN 0002-8282

PDF - Accepted Version
Download (975kB) | Preview
Identification Number: 10.1257/aer.98.1.145


This paper compares centralized and decentralized coordination when managers are privately informed and communicate strategically. We consider a multidivisional 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 self-interested 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 coordination improves horizontal communication but worsens vertical communication. As a result, decentralization can dominate centralization even when coordination is extremely important relative to adaptation.

Item Type: Article
Official URL:
Additional Information: © 2008 American Economic Association
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HE Transportation and Communications
JEL classification: D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M11 - Production Management
Date Deposited: 05 Aug 2014 13:49
Last Modified: 20 Oct 2021 01:46

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics