Stovepiping

Abstract

In hierarchical organizations lower-level agents can often censor the information that a higher-level principal has available to make a decision. We present a model of this interaction in which the principal can also access an independent source of unfiltered but lower-quality information besides that provided by the agent. This provision of outside information can be thought of as ‘stovepiping,’ the transmission of unfiltered information from analysts directly to decision-makers. Stovepiping can, in equilibrium, result in the agent passing along more information to the principal, precisely because the outsider’s information is of lower quality than the agent’s. But it can also lead the agent to ‘destroy’ information so that there is no basis for any policy change. Accordingly, stovepiping has countervailing effects on the principal’s utility. We discuss the comparative statics of equilibrium levels of information transmission with respect to the preferences of the principal, the outsider, and the probability that the outsider has access to the information held by the agent.