Salience and management‐by‐exception

Moritz Mosenhauer

Managerial and Decision Economics, 2022, vol. 43, issue 8, 3685-3697

Abstract: This paper studies a firm's organisational responses if its agents misevaluate information. If a manager overreacts to unusual events, it may be desirable for the firm to adopt the management practice management‐by‐exception. I develop a theoretical framework to study this technique and derive conditions under parsimonious assumptions for when it should be adopted. Moreover, I show how further assumptions can refine the model's predictions, establishing a direct link between the manager's over‐responsiveness and organisational rigidity. The strategy is implemented by controlling the information that the manager receives.

Date: 2022
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https://doi.org/10.1002/mde.3622

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:43:y:2022:i:8:p:3685-3697

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