Optimal Organizational Design in a Dichotomous-Choice Project Selection Model
نویسندگان
چکیده
This paper studies various aspects of the optimal design of economic organizations in the context of a project selection model, where decisions are made by fallible managers regarding the adoption or rejection of investment projects. I analyze the role of marginal decision costs, and establish that the sequentia l decision architecture is a pair of probability thresholds, and a corresponding pair of majority rules that vary with the stage of project evaluation. The paper also analyzes the adjustment in the minimum organizational size and the decision architecture as changes occur in the quality of the investment environment and managerial expertise. JEL Classification number: D81
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