We examine how cheap talk communication between managers within the same firm depends on the type of decisions that the firm makes. A firm consists of a headquarters and two operating divisions. Headquarters is unbiased but does not know the demand conditions in the divisions' markets. Each...

We examine the relationship between the organization of a firm and its ability to adapt to changes in the environment. We show that even if lower-level managers have superior information about their local conditions, and incentive conflicts are negligible, a centralized organization can be...

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 responsive to local conditions but also coordinated with each other. Information about local...