Communication and Decision Making in Heterogeneous Partnerships

Behrang Manouchehrabadi (Erasmus University)
George Hendrikse (Erasmus University)

Abstract: We investigate the effects of member heterogeneity on communication and decision making in partnerships. We show that member heterogeneity makes communication noisy in a partnership and this in turn alters the optimal allocation of decision rights in the partnership. In addition, the effect of heterogeneity also depends on the market in which the partnership operates. Finally, it is shown that repeated interactions alleviates the communication problem resulting from heterogeneity.

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