DP16768 Organizing Data Analytics

Author(s): Ricardo Alonso, Odilon Câmara
Publication Date: December 2021
Keyword(s): Audit, Bayesian persuasion, Information Technology, Organizational design, strategic experimentation, tampering
JEL(s): D8, D83, M10
Programme Areas: Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16768

We develop a theory of credible skepticism in organizations to explain the main trade-offs in organizing data generation, analysis and reporting. In our designer-agent-principal game, the designer selects the information privately observed by the agent who can misreport it at a cost, while the principal can audit the report. We study three organizational levers: tampering prevention, tampering detection and the allocation of the experimental-design task. We show that motivating informative experimentation while discouraging misreporting are often conflicting organizational goals. To incentivize experimentation, the principal foregoes a flawless tampering detection/prevention system and separates the tasks of experimental design and implementation.