Asymmetric Information Allocation to Avoid Coordination Failure

Abstract:

This study addresses optimal information allocation in team production. We present a unique implementation problem of desirable effort levels and show that, under certain conditions, it is optimal to asymmetrically inform the agents even if they are ex ante symmetric. The main intuition is that the asymmetric information allocation is effective in avoiding “bad” equilibria, that is, equilibria with coordination failure. This analysis provides an explanation as to why informing agents asymmetrically might be beneficial in improving the agents’ coordination behaviors.