Evaluation Problem Versus Selection Problem in Organizational Structures

Tinbergen Institute Discussion Paper No. TI 05-058/1

10 Pages Posted: 13 Jun 2005

See all articles by Stefano Ficco

Stefano Ficco

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Vladimir A. Karamychev

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: May 2005

Abstract

We consider a hierarchical organization with two fully rational agents. The goal of the organization is that of selecting the best alternative out of several available, and agents are heterogenous in the accuracy with which they screen the alternatives. We show that, if internal communications between agents is not possible, the ordering of agents affects the performance of the organization. More specifically, we find that the expected payoff of the organization improves when the more accurate agent screens first. Finally, we note that such optimal ordering makes the hierarchy formally identical to one in which the internal communication flow is perfect.

Keywords: Organizations, imperfect communication, selection

JEL Classification: D23, D70, D81

Suggested Citation

Ficco, Stefano and Karamychev, Vladimir A., Evaluation Problem Versus Selection Problem in Organizational Structures (May 2005). Tinbergen Institute Discussion Paper No. TI 05-058/1, Available at SSRN: https://ssrn.com/abstract=742405 or http://dx.doi.org/10.2139/ssrn.742405

Stefano Ficco (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Vladimir A. Karamychev

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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