Rational Inattention and Organizational Focus
Journal
American Economic Review
Subject
Economics
Publishing details
Authors / Editors
Dessein W;Galeotti A;Santos T
Biographies
Publication Year
2016
Abstract
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.
Available on ECCH
No
