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Rational Inattention and Organizational Focus

Dessein, Wouter and Galeotti, Andrea and Santos, Tano (2016) 'Rational Inattention and Organizational Focus.' American Economic Review, 106 (6). 1522 - 1536. ISSN 0002-8282

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This paper studies optimal communication flows in organizations. A production process can be coordinated ex ante, by letting agents stick to a prespecified plan of action. Alternatively, agents may adapt to task-specific shocks, in which case tasks must be coordinated ex post, using communication. When attention is scarce, an optimal organization coordinates only a few tasks ex post. Those tasks are higher performing, more adaptive to the environment, and influential. Hence, scarce attention requires setting priorities, not just local optimization. Our results provide microfoundations for a central idea in the management literature that firms should focus on a limited set of core competencies.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 15 Jan 2016 16:25
Last Modified: 08 Feb 2021 21:15

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