Coordination in complex environments
TLDR
This paper studies coordination in complex environments, identifying a new conformity phenomenon that influences exploration or status-quo bias.
Key contributions
- Introduces a beauty-contest game embedded in a complex environment to study coordination.
- Identifies a novel conformity phenomenon influencing decision-making in uncertain contexts.
- Shows this effect can drive exploration of new alternatives or reinforce status-quo bias based on network structure.
- Demonstrates decentralized authority can optimize profits in sufficiently complex organizational settings.
Why it matters
This research sheds light on how individuals coordinate in uncertain, innovative settings. Understanding the identified conformity effect is crucial for designing organizational structures that foster innovation or maintain stability. It offers insights for managing complex systems effectively.
Original Abstract
Coordination is an important aspect of innovative contexts, where: the more innovative a course of action, the more uncertain its outcome. To study the interplay of coordination and informational ``complexity'', I embed a beauty-contest game into a complex environment. I identify a new conformity phenomenon. This effect may push towards the exploration of unknown alternatives or constitute a status-quo bias, depending on the network structure of players' interactions. In an application, I show that an organization with decentralized authority can implement profit maximization in a sufficiently complex environment.
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