Managerial Leadership, Truth-Telling, and Efficient Coordination

• Authors: Jordi Brandts.
• BSE Working Paper: 112251 | October 20
• Keywords: experiments , Coordination , Organizations , communication , truth-telling
• JEL codes: C92, D23, L20
• experiments
• Coordination
• Organizations
• communication
• truth-telling

We study the manager-agent (MA) game, a novel coordination game played between a manager and two agents. Unlike commonly studied coordination games, the MA game stresses asymmetric information (agents know the state of the world but managers don’t) and asymmetric payoffs (for all states of the world, agents have opposing preferences over outcomes). Efficient coordination requires coordinating agents’ actions and utilizing their private information. We vary how agents’ actions are chosen (managerial control versus delegation), the mode of communication (none, structured communication, or free-form chat), and the channels of communication (i.e. who can communicate with each other). Achieving coordination per se is not challenging, but, averaging across all states of the world, total surplus only surpasses the safe outcome when managerial control is combined with three-way free-form chat. Unlike weak-link games, advice from managers to agents does not increase total surplus. The combination of managerial control and free-form chat works because under these conditions agents rarely lie about their private information. Our results suggest that common findings from the experimental literature on lying are not robust to changes in the mode of communication.