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BSZ_IM_Ch12_4e - Managerial Economics and Organizational...

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Managerial Economics and Organizational Architecture Instructor’s Manual Part 1: Chapter Overview and Solutions Chapter 12: Page 1 CHAPTER 12 D ECISION R IGHTS : T HE L EVEL OF E MPOWERMENT This is the first of two chapters on the assignment of decision rights. It considers the optimal assignment of a given decision right (such as the right to set the price of a product). It begins by considering whether the right should be centralized or decentralized. Then it examines where in a hierarchical level the decision right should be placed and whether the right should be granted to an individual or a team of workers. The chapter also introduces the important concepts of decision management, decision control, and influence costs. It provides a short case study and an appendix that analyzes the economics of collective decision making (for example, team decision making) in greater detail. C HAPTER O UTLINE A SSIGNING T ASKS AND D ECISION R IGHTS C ENTRALIZATION VERSUS D ECENTRALIZATION Benefits of Decentralization Costs of Decentralization Illustrating the Trade-offs Management Implications L ATERAL D ECISION -R IGHT A SSIGNMENT A SSIGNING D ECISION R IGHTS TO T EAMS Benefits of Team Decision Making Costs of Team Decision Making Management Implications D ECISION M ANAGEMENT AND C ONTROL D ECISION R IGHT A SSIGNMENT AND K NOWLEDGE C REATION I NFLUENCE C OSTS C ASE S TUDY : M EDFORD U NIVERSITY S UMMARY A PPENDIX : C OLLECTIVE D ECISION M AKING
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