Decision Making and Learning in a Globalizing World
Tinbergen Institute Discussion Paper 10-034/1
46 Pages Posted: 25 Mar 2010
Date Written: March 19, 2010
We study two aspects of globalization. It allows a decision-maker to go beyond his own local experience and to learn from other decision-makers in addressing common problems. This improves the identification and diffusion of best practices. It also provides extra information to 'markets' that evaluate decision-makers: comparisons become possible. We identify conditions under which the globalization of markets helps or hurts (i) the communication among decision-makers about their own experience and (ii) the quality of the decision that is taken next. An important mediating factor is whether decision-making is centralized or decentralized.
Keywords: centralization, decentralization, learning, cheap talk, reputational concerns, globalization, policy diffusion
JEL Classification: D83, D70, D02
Suggested Citation: Suggested Citation