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A Theory of Hierarchies Based on Limited Managerial Attention




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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  • John Geanakoplos & Paul R. Milgrom, 1988. "A Theory of Hierarchies Based on Limited Managerial Attention," Cowles Foundation Discussion Papers 775R, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:775r
    Note: CFP 794.

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    References listed on IDEAS

    1. Paul R. Milgrom & Robert J. Weber, 1983. "Organizing Production in a Large Economy," Cowles Foundation Discussion Papers 672, Cowles Foundation for Research in Economics, Yale University.
    2. Beckmann, Martin J., 1977. "Management production functions and the theory of the firm," Journal of Economic Theory, Elsevier, vol. 14(1), pages 1-18, February.
    3. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
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