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Hierarchical reporting, aggregation, and information cascades

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Author Info

  • 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.

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File URL: http://hdl.handle.net/10.1002/mde.1267
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 5 ()
Pages: 355-362

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Handle: RePEc:wly:mgtdec:v:27:y:2006:i:5:p:355-362

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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References

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  1. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  2. Mathias Dewatripont & Patrick Bolton, 1994. "The firm as a communication network," ULB Institutional Repository 2013/9595, ULB -- Universite Libre de Bruxelles.
  3. Hirshleifer, David & Teoh, Siew Hong, 2001. "Herd Behavior and Cascading in Capital Markets: A Review and Synthesis," MPRA Paper 5186, University Library of Munich, Germany.
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Cited by:
  1. Randall Morck, 2008. "Behavioral finance in corporate governance: economics and ethics of the devil’s advocate," Journal of Management and Governance, Springer, vol. 12(2), pages 179-200, May.

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