Applied Economics Seminar Series. "Learning from Others? Rigidity, Open Mindedness and the Role of Coordination" (With Fabrizio Adriani and David Rojo Arjona)
Published: 10 October 2024
16 October 2024. Professor Silvia Sonderegger, University of Nottingham
Professor Silvia Sonderegger, University of Nottingham
"Learning from Others? Rigidity, Open Mindedness and the Role of Coordination" (With Fabrizio Adriani and David Rojo Arjona)
Wednesday, 16 October 2024. 15:00-16:30
Room 141A, Adam Smith Business School
Abstract
The traditional approach to the transmission of information between agents assumes that information can be deciphered at no cost, but in practice this is not the case. Reading a report or following a powerpoint presentation requires costly effort and attention.
We explore the implications of this processing cost in a theory-informed experiment. Agents in an organization are matched pairwise. Productivity depends on both adaptation -- the extent to which an agent's action matches the (unobservable) state of the world -- as well as coordination with the other agent. Each agent receives a private signal on the state of the world and chooses between two options: (i) select the action that matches her own signal and ignore her counterpart (rigid attitude) or (ii) incur a “listening cost” to observe the signal of her counterpart, in which case she can choose her action based on both signals (open minded attitude).
Our key findings suggest that agents generally exhibit excessive rigidity, but this is somewhat mitigated when incentives to coordinate are strong. This clarifies that agents are not averse to open mindedness per se. They value flexibility and are willing to adapt when this is necessary to avoid a costly coordination failure. However, when coordination is unimportant, they predominantly adopt a rigid attitude. These findings are consistent with a model where agents suffer from a perception bias: they systematically underestimate the informativeness of the signals available to others. We discuss implications for policy and organization design.
Bio
Silvia Sonderegger is a Professor of Economics at the University of Nottingham. She works primarily on applied theory and behavioral economics with applications to information transmission and social norms among others.
For further information, please contact business-seminar-series@glasgow.ac.uk.
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First published: 10 October 2024