This paper presents a novel explanation of the decision by a firm to make an input within the firm rather than to out-source the production to another firm. Due to the limited attention of the manager/entrepreneur, time spent overseeing production in-house has an opportunity cost: the neglect of...

A utility maximizing model of allocating limited attention between adopting new behaviors and adapting current behaviors generates an optimal policy that resembles commonly observed, and apparently irrational, behavioral rules. The ability to update current behaviors implies an endogenous...

The optimal innovation, firm size, and growth are derived for a centrally controlled firm in which only the entrepreneur evaluates and restores current projects or evaluates and adopts new projects. Current projects are subject to failure (due to entry) and possible obsolescence, while new...

This paper characterizes the optimal policy for a model in which manager may adopt an endogenous number of projects but has only limited resources to devote to their evaluation and maintenance. In any period, the manager may discard any subset of existing projects but may evaluate only one...

A decision-maker's limited attention is allocated between writing new contracts and directing current contracts. More time spent writing a new contract makes the contract more complete. A more complete contract performs better and generates higher returns. The optimal allocation of attention...