Title

A Theory of Hierarchies Based on Limited Managerial Attention

Document Type

Discussion Paper

Publication Date

9-1-1985

CFDP Number

775R

CFDP Revision Date

1988-10-01

CFDP Pages

33

Abstract

Our purpose in this paper is to investigate the economics of managerial organizations by focusing on the decision problem of management. Ours is a “team theory” analysis, that is, it ignores the problem of conflicting objectives among managers and focuses instead on the problem of coordinating the decisions of several imperfectly informed actors. However, unlike classical team theory, we concentrate on the choice by managers of what to know, as well as what to do, and we allow the possibility that bounded rationality limits the managers’ ability to understand subtle messages.

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