Fallibility and Sequential Decision-Making

Fallibility and Sequential Decision-Making

Individuals typically make errors in evaluating information. In this paper, we consider a project selection problem, where fallible managers screen projects sequentially, and provide independent opinions on its quality. We compare the relative performance of the hierarchy and polyarchy when η (n >...

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Bibliographic Details
Main Author: KOH, Winston T. H.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 1994
Subjects:
Polyarchy
Project management
Variable costs
Management hierarchy
Gross profits
Comparative advantage
Management decisions
Data collection
Profitability
Economics
Economic Theory
Online Access:https://ink.library.smu.edu.sg/soe_research/531
https://ink.library.smu.edu.sg/context/soe_research/article/1530/viewcontent/Fallibility_1994_afv.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Individuals typically make errors in evaluating information. In this paper, we consider a project selection problem, where fallible managers screen projects sequentially, and provide independent opinions on its quality. We compare the relative performance of the hierarchy and polyarchy when η (n > 2) managers are employed to evaluate projects. In addition to generalizing the existing results on the optimal screening standards, I discuss and characterize the optimal organizational size, and how the relative desirability of the two sequential decision processes are affected by changing the project quality. Finally, I also discuss the effect of variable evaluation costs on the optimal evaluation standards.

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