Incentives to Help in Multi-Agent Situations

This paper concerns the design of the firm organization to obtain and use information efficiently in organization decision making. The focus is on coordination of shop managers' operating decisions through the choice of the organization structure such as the coordination system (hierarchical or horizontal) and information processing capacities of subordinates (specialists or generalists). Assuming that information acquiring, rocessing, and communication are costly, we show that in "volatile" environments, the optimal organization structure is the one typically found in Japanese firms, where coordination tasks are delegated to bordinates who are nonspecialized in tasks and information acquiring so that they can share each other's cn-the-spot knowledge.