Untitled - socium.ge

154 Marshall Van Alstyne and Nathaniel BulkleyIn addition to risk reduction through risk pooling in insurance and stockmarkets, the economics of uncertainty focuses on the design of mechanismsthat address risks arising from information asymmetry in market exchange,such as adverse selection (pre-contractual information asymmetry) or moralhazard (post-contractual information asymmetry). The underlying idea is thatefficiency gains can be realized through information mechanisms that preventpoor transactions or unnecessarily waste resources in the course of establishingmutually beneficial transactions. These include signaling mechanismsestablished by the party with the private information (for example, the sellerof a used car offering a guarantee) and screening mechanisms established bythe party attempting to ascertain the truth of private information (for example,a potential employer requesting educational credentials from job applicants)(Akerlof, 1970; Spence, 1973). Economic literature further distinguishesbetween one-shot and repeated contracts. In the latter, factors such as reputationcan encourage trading and mitigate the risk of opportunistic behavior(Tirole, 1988). More formally:Hypothesis 2: Information that reduces risk aversion increases productivitywhen it leads to actions that are closer to true risk-neutral levels.In executive recruiting, risk aversion could be associated with a preferencefor gathering as much information about a candidate as possible or a perceptionthat there are severe costs from missing the right information. Recruiterswho could “pull the trigger faster” on a candidate had weakly correlatedhigher completion rates but this was not statistically significant. We have notfound significant relationships between these survey measures and output.Economists’ interest in the role of information frequently extends beyond afocus on the individual decision-maker to an interest in how the structure ofexchange relationships affects the ability of self-interested people to jointlyachieve efficient outcomes. For example, the principle that co-location of aright decision with the most complete information promotes efficiency underlieseconomic arguments for conditions under which competitive marketspromote efficient outcomes.Within organizations, the importance of global factors favors data centralizationsince it promotes coordination and consistency. Examples include decisionsinvolving organization-wide processes (for example, accounting,finance, and legal services), integral aspects of design processes (Ulrich,1995), and crises in which rapid coordination is essential (Bolton and Farrell,1990). Additional layers of hierarchical review may also be favored whencosts of bad projects are high relative to the benefits of good ones (Sah andStiglitz, 1986). Economically, centralization limits the costs of redundantsystems, in terms of construction, maintenance, and search. Technically,centralization is favored in terms of data integrity and enforcing a uniformstandard (Van Alstyne et al., 1995).