Econometrica: Sep 1993, Volume 61, Issue 5
The Organization of Decentralized Information Processing
Roy RadnerIn a decision-theoretic model of a firm, I represent managers as information processors of limited capacity; efficiency is measured in terms of the number of processors and the delay between the receipt of information by the organization and the implementation of the decision. I characterize efficient networks for both one-shot and repeated regimes, as well as the corresponding "production function" relating the number of items processed to the number of processors and the delay. I sketch some applications to common decision paradigms, and implications for decentralization and organizational returns to scale.
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