Authority and Specialization Under Informational Interdependence

ABSTRACT We analyze authority allocation to incentivize information acquisition under interdependence. Agents access noisy signals about two states of the world. Beyond costs, acquisition depends on the expected influence on decisions, determined by whether authority is centralized or split among decision‐makers. Restricting an agent's information on the extensive margin enhances communication. When such specialization is not feasible, informational congestion may induce similar incentive effects. Split authority may lead decision‐makers to lose perspective by failing to internalize interdependence. The findings suggest that multinational corporations must manage the extent of authority granted to subsidiaries to ensure efficient information flow across products and regions.