The role of supplier-induced demand on the occurrence of information overload in managerial reporting environments.

Abstract

This article develops a model showing how information reporters influence information load among decision makers and generate supplier-induced information demand (SID). The intra-corporate information-providing process is an expert market with information asymmetry. I show that information overload occurs as an SID and is the result of informational overconsumption deliberately caused by the supplying reporter. My analysis highlights that the information overload depends on the specificity of information. It also shows that the decision maker may face a hold-up situation in light of switching costs. The more specific the information needed, the higher the threat of information overload. The strategic content of information tempts reporting managers to overload the decision maker for the purpose of increasing their reporting transfer price and to discourage the decision maker from getting the information from another reporting manager. Although the decision maker knows a part of the information demand, information overload involves the cost of using unnecessary inputs, information overload occurs as an SID of information, even if other competing reporting managers exist. My analysis demonstrates that information overload can occur due to uncertainty and opportunism of both the decision maker and reporting managers.