Research seminars

Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment

Finance

Speaker: Andrey Malenko
Massachussets Institute of Technology

22 October 2015


This paper develops a theory of how organizations make timing decisions. We consider a problem where an uninformed principal decides when to exercise an option and interacts with an informed but biased agent. This problem is common: examples include headquarters deciding when to close a plant, drill an oil well, or launch a product. Because time is irreversible, the direction of the agentís bias is crucial for communication and allocation of authority. When the agent favors late exercise, centralized decision-making, where the principal retains authority and communicates with the agent, often features full information revelation but ine¢ cient delay. Delegation is never optimal in this case. In contrast, when the agent favors early exercise, communication under centralized decision-making is partial, while option exercise is unbiased or delayed. Delegation is optimal if the bias is small or delegation can be timed. Thus, delegating decisions such as plant closures is never optimal, while delegating decisions such as product launches may be optimal.

Finance

Speaker: Xavier Gabaix

13 June 2019 - T104 - From 2:00 pm to 3:15 pm


Finance

Speaker: Adriano Rampini

23 May 2019 - T105 - From 2:00 pm to 3:15 pm


Finance

Speaker: Luke Taylor

16 May 2019 - T105 - From 2:00 pm to 3:15 pm


Finance

Speaker: Jessica Jeffers

18 April 2019 - T104 - From 2:00 pm to 3:15 pm


Finance

Speaker: Emil Verner

4 April 2019 - T104 - From 2:00 pm to 3:15 pm



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