Reports of exceptions: An experimental study of centralized information in a financial organization

An experiment involving a simulated financial lending organization was used to compare subjects' decisions regarding the degree to which the organization should be informationally centralized, with that of an optimal decision rule based on a normative model. Typically, subjects overdecentralized the information structure to process small loans, and overcentralized the information structure to process large loans. Both the theoretical and practical implications of these results are discussed.