Topic: Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns

Decision-makers can learn from their own past experience, and, potentially, from
the experience of other decision-makers who face similar problems. When experience
is private information, communication is necessary to learn from others. In a two-
period model in which decision-makers care about their reputation, we study how
the assignment of decision rights (who decides on the actions taken in period two?)
and the information on which reputations are based determine (i) the willingness to
share information, (ii) decisions, and (iii) welfare. Centralizing decision rights may
hurt welfare due to the negative effect on the quality of communication. The welfare
effects of reputation depend on whether perceptions of a decision-maker’s ability are
based solely on his own action or on comparisons across decision-makers, and on the
assignment of decision rights.