The Demand for Coordination

This paper endogenizes coordination problems in organizations by allowing for both ex ante coordination of activities, using rules and task guidelines, and ex post coordination, using communication and broad job assignments. It shows that: (i) Task specialization and the division of labor is mainly limited by employee discretion, rather than by the importance of coordination. In particular, specialization is often non-monotonic in the importance of coordination. (ii) Organizations exhibit increasing returns to ex post coordination. This rationalizes discrete `shifts' in organizational design from very rigid and specialized task assignments, to very flexible organizations characterized by extensive task bundling, intensive horizontal communication and substantial employee discretion. (iii) Broad task assignments and intensive horizontal communication are complementary. Hence, lower communication costs often result in less specialization.

Network Competition with HeterogeneousCalling Patterns

We show how differences in demand and unbalanced call flows affect considerably thepricing strategies of competing telecommunications networks and this both forcompetition in linear and nonlinear pricing. Differences in demand give also scope fortargeted entry. If networks are close substitutes, we show that an incumbent is able todeter such targeted entry on a customer segment which tends to have a net outflow ofcalls, though this is harder in nonlinear than in linear pricing. ZUSAMMENFASSUNG - (Netzwettbewerb bei heterogener Nachfrage) In dem Aufsatz wird gezeigt, wie Unterschiede in der Nachfrage und ungleichgewichtige Folgen von Telefonanrufen die Preisstrategien der im Wettbewerb stehenden Anbieter von Telekommunikationsnetzen beeinflussen. Dies gilt für den linearen und nicht linearen Preiswettbewerb. Unterschiede in der Nachfrage schaffen auch einen Spielraum für bewußte Markteintritte. Wenn Netze enge Substitute sind, dann kann gezeigt werden, daß die eingesessenen Netzanbieter im Stande sind, derartige Markteintritte in Kundensegmente zu verhindern, die durch einen Nettoüberschuß an herausgehenden Anrufen gekennzeichnet sind. Dies ist jedoch bei nicht linearer Preispolitik schwieriger als bei linearer Preispolitik.Telecommunications; interconnection; unbalanced calling patterns; two-way access; competition policy

Network Competition in Nonlinear Pricing

Previous research has argued that, in the mature phase of competition,telecommunications networks may use access charges as an instrument of collusion. Weshow that this result depends totally on the assumption of linear pricing. Though undernonlinear pricing, the access charge alters the way networks use menus of tariffs todiscriminate implicitly among heterogeneous customers, profits are then independent ofthe access charge, or, if participation constraints are binding, are maximized by thewelfare maximizing access charge. In the entry phase, networks often differ in coststructure. An access markup then affects the level playing field between networks. ZUSAMMENFASSUNG - (Netzwettbewerb bei nicht linearer Preispolitik) Die industrieökonomische Forschung hat bisher gezeigt, daß in der Marktphase der Reife, beim Wettbewerb von Telekommunikationsnetzen die Zugangsgebühren als ein Instrument des kollusiven Verhaltens eingesetzt werden können. Es wird gezeigt, daß dieses Ergebnis vollständig von den Annahmen des linearen Preisverhaltens abhängt. Obwohl bei nichtlinearer Preispolitik Zugangsgebühren den Einsatz von Tarifmenüs der Netzwerkbetreiber hinsichtlich einer impliziten Diskriminierung zwischen heterogenen Nachfragern beeinflussen, sind die Gewinne dann aber unabhängig von den Zugangsgebühren oder, wenn Teilnahmebeschränkungen bindend sind, dann werden sie maximiert durch die wohlfahrtmaximierenden Zugangsgebühren. In der Markteintrittsphase sind Netze oft durch Unterschiede in der Kostenstruktur gekennzeichnet. Ein Zugangsgebührenzuschlag beeinflußt dann das Niveau, auf dem der Wettbewerb der Netzanbieter stattfindet.Telecommunications; Interconnection; two-way access; competition policy; nonlinear pricing

Network competition in nonlinear pricing

"Previous research has argued that, in the mature phase of competition, telecommunications networks may use access charges as an instrument of collusion. We show that this result depends totally on the assumption of linear pricing. Though under nonlinear pricing, the access charge alters the way networks use menus of tariffs to discriminate implicitly among heterogeneous customers, profits are then independent of the access charge, or, if participation constraints are binding, are maximized by the welfare maximizing access charge. In the entry phase, networks often differ in cost structure. An access markup then affects the level playing field between networks." (author's abstract)"Die industrieökonomische Forschung hat bisher gezeigt, daß in der Marktphase der Reife, beim Wettbewerb von Telekommunikationsnetzen die Zugangsgebühren als ein Instrument des kollusiven Verhaltens eingesetzt werden können. Es wird gezeigt, daß dieses Ergebnis vollständig von den Annahmen des linearen Preisverhaltens abhängt. Obwohl bei nichtlinearer Preispolitik Zugangsgebühren den Einsatz von Tarifmenüs der Netzwerkbetreiber hinsichtlich einer impliziten Diskriminierung zwischen heterogenen Nachfragern beeinflussen, sind die Gewinne dann aber unabhängig von den Zugangsgebühren oder, wenn Teilnahmebeschränkungen bindend sind, dann werden sie maximiert durch die wohlfahrtmaximierenden Zugangsgebühren. In der Markteintrittsphase sind Netze oft durch Unterschiede in der Kostenstruktur gekennzeichnet. Ein Zugangsgebührenzuschlag beeinflußt dann das Niveau, auf dem der Wettbewerb der Netzanbieter stattfindet." (Autorenreferat

Network competition with heterogeneous calling patterns

"We show how differences in demand and unbalanced call flows affect considerably the pricing strategies of competing telecommunications networks and this both for competition in linear and nonlinear pricing. Differences in demand give also scope for targeted entry. If networks are close substitutes, we show that an incumbent is able to deter such targeted entry on a customer segment which tends to have a net outflow of calls, though this is harder in nonlinear than in linear pricing." (author's abstract)"In dem Aufsatz wird gezeigt, wie Unterschiede in der Nachfrage und ungleichgewichtige Folgen von Telefonanrufen die Preisstrategien der im Wettbewerb stehenden Anbieter von Telekommunikationsnetzen beeinflussen. Dies gilt für den linearen und nichtlinearen Preiswettbewerb. Unterschiede in der Nachfrage schaffen auch einen Spielraum für bewußte Markteintritte. Wenn Netze enge Substitute sind, dann kann gezeigt werden, daß die eingesessenen Netzanbieter im Stande sind, derartige Markteintritte in Kundensegmente zu verhindern, die durch einen Nettoüberschuß an herausgehenden Anrufen gekennzeichnet sind. Dies ist jedoch bei nichtlinearer Preispolitik schwieriger als bei linearer Preispolitik." (Autorenreferat

Organizing to adapt and compete

We examine the relationship between the organization of a multi-divisional firm and its ability to adapt production decisions to changes in the environment. We show that even if lower-level managers have superior information about local conditions, and incentive conflicts are negligible, a centralized organization can be better at adapting to local information than a decentralized one. As a result, and in contrast to what is commonly argued, an increase in product market competition that makes adaptation more important can favor centralization rather than decentralization

Strategic communication: prices versus quantities

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 division manager knows the demand conditions in his market but is also biased toward his division. The division managers communicate with headquarters, which then sets either the prices or quantities for each division. The quality of communication depends on whether headquarters sets prices or quantities. This is the case even though, once communication has taken place, expected profits are the same whether headquarters sets prices or quantities

Rational Inattention and Organizational Focus

This paper studies optimal communication flows in organizations. A production process can be coordinated ex ante, by letting agents stick to a prespecified plan of action. Alternatively, agents may adapt to task-specific shocks, in which case tasks must be coordinated ex post, using communication. When attention is scarce, an optimal organization coordinates only a few tasks ex post. Those tasks are higher performing, more adaptive to the environment, and influential. Hence, scarce attention requires setting priorities, not just local optimization. Our results provide microfoundations for a central idea in the management literature that firms should focus on a limited set of core competencies

Centralization versus decentralization: an application to price setting by a multi-market firm

This paper compares centralized and decentralized price setting by a firm that sells a single product in two markets, but is constrained to set one price (e.g., due to arbitrage). Each market is characterized by a different linear demand function, and demand conditions are privately observed by a local manager. This manager only cares about profits in his own market and, as a result, communicates his information strategically. Our main results link organizational design to market demand. First, if pricing is decentralized, it is always delegated to the manager who faces the flattest inverse demand function, regardless of the size of market demand. Second, even when pricing can be allocated to an unbiased headquarters, decentralization is optimal when markets differ sufficiently in how flat the inverse demand functions are. Finally, decentralization is more likely when, in expectations, local managers disagree more about prices