Rational Inattention and Organizational Focus

Wouter Dessein, Andrea Galeotti and Tano Santos

American Economic Review, 2016, vol. 106, issue 6, 1522-36

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.

JEL-codes: D23 D83 D85 L23 M11 M54 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20140741
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.20140741 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... eyPvb-3b_QMz_pSor4rY (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... v_xK7hyZW_H_A9p7TBr_ (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Rational Inattention and Organizational Focus (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:106:y:2016:i:6:p:1522-36

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().