Fallibility and Sequential Decision-Making

• 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
• Institution: Singapore Management University

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.