Information Acquisition, Decision Making, and Implementation in Organizations

Abstract

We study the value of divergence in values and preferences in organizations by combining three stages of a decision process—ex ante information acquisition, interim project choice, and ex post project execution—into a tractable model. A key insight is that our unified model provides predictions different from models without the execution decision stage. We consider an organization that consists of a decision maker who selects a project and an implementer who acquires costly information before project choice and executes the selected project. They have intrinsic and possibly divergent preferences over projects. We show that, although the implementer’s dual role generates a disadvantage of designing conflicts in terms of the implementation motivation, it simultaneously boosts the implementer’s motivation for information acquisition to influence the decision maker’s project choice more under divergent preferences. Our results provide managerial insights that designing conflicts is beneficial only in environments where additional information is sufficiently precise and must be accompanied by a manager who is balanced and incorporating feedback. This paper was accepted by Joshua Gans, business strategy.

Mediating Internal Competition for Resources*

“…[2009], Che & Kartik [2009], Van den Steen [2010a], Van den Steen [2010b], Callander & Harstad [2015], Hirsch & Shotts [2015], Bonatti & Rantakari [2016], Deb et al . [2021], and Itoh & Morita [2023]. The main aim of our paper, adding to and complementing the work above, is to study how conflict can be managed within an organization.…”

“…In their paper, heterogeneity in preferences helps the decision maker to commit to use payoff relevant information about a project. Itoh & Morita [2023] enrich this framework by introducing an information gathering stage at the start of the game. Relatedly, Omiya et al [2017] study the benefits of heterogeneity and the optimal allocation of authority within organizations for information acquisition.…”