Organizational Coordination with Decentralized Costly Communication

Prior experimental evidence finds decentralized pre-play communication to facilitate efficient coordination among interdependent agents. However, the kind of communication in these experiments is unrealistic for most organizational contexts, as it consists of costless messages from every agent, which are sent every time a coordination game is played. We study how communication use and its effectiveness change when one considers that sending messages is often both costly and voluntary, and investigate the effectiveness of alternative communication policies employed by a firm. The policies differ in the degree to which message use is voluntary and in who bears the costs for communication. Imposing even small communication costs on employees dramatically reduces message use, but efficient coordination occurs more frequently when the proportion of message costs borne by employees is small. We conclude that under certain conditions, large but incomplete subsidies for using communication can be an optimal solution for obtaining efficient coordination in firms.