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Hierarchical reporting, aggregation, and information cascades

Author

Listed:
  • Anil Arya

    (Ohio State University, USA)

  • Jonathan Glover

    (Carnegie Mellon University, USA)

  • Brian Mittendorf

    (Yale School of Management, USA)

Abstract

Aggregation is commonly associated with loss of information. In contrast, this paper shows that aggregation can actually enhance information down-the-road by deterring information cascades. In particular, when hierarchical tiers forward only aggregate recommendations rather than nitty-gritty details, it increases the uncertainty faced by subsequent tiers. This makes individuals at higher levels more willing to rely on and convey their own views rather than simply rubber stamping suggestions from lower levels. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Anil Arya & Jonathan Glover & Brian Mittendorf, 2006. "Hierarchical reporting, aggregation, and information cascades," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 355-362.
    • Handle: RePEc:wly:mgtdec:v:27:y:2006:i:5:p:355-362
    DOI: 10.1002/mde.1267
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    References listed on IDEAS

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    3. David Hirshleifer & Siew Hong Teoh, 2003. "Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis," European Financial Management, European Financial Management Association, vol. 9(1), pages 25-66, March.
    4. Demski, Js & Sappington, Dem, 1989. "Hierarchical Structure And Responsibility Accounting," Journal of Accounting Research, Wiley Blackwell, vol. 27(1), pages 40-58.
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