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Please use this identifier to cite or link to this item:
http://hdl.handle.net/1783.1/791
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| Title: | Hierarchies and the self-control of risk attitude |
| Authors: | Wathieu, Luc |
| Keywords: | Information decentralization
Reference points
Dynamic choice under risk
Conservatism
Decision making |
| Issue Date: | Dec-1994 |
| Series/Report no.: | Marketing Working Paper Series ; MKTG 95.031 |
| Abstract: | In hierarchies, top members are not continuously informed about the intermediary outcomes of their policies. This feature of organizational decision making is often regarded as a drawback caused by communication costs. On the contrary, we argue that such information decentralization creates a valuable interface between a decision maker and his environment. We assume a reference-dependent utility function à la Kahneman and Tversky. Personal contact with an intermediary outcome provokes a shift of reference point, and thereby a change of attitude towards the forthcoming alternative risks. Information decentralization stabilizes the reference point. We characterize classes of dynamic choice situations where this effect should prove desirable. Then, we show that hierarchical systems can help decision makers overcome their personal conservative tendencies. |
| URI: | http://hdl.handle.net/1783.1/791 |
| Appears in Collections: | MARK Working Papers
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| mktg95031.pdf | | 1789Kb | Adobe PDF | View/Open |
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