Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/nwu/cmsems/1231.html
   My bibliography  Save this paper

Real-Time Hierarchical Resource Allocation

Author

Listed:
  • Timothy Van Zandt
Abstract
This paper presents a model that distinguishes between decentralized information processing and decentralized decision making in organizations; it shows that decentralized decision making can be advantageous due to computational delay, even in the absence of communication costs. The key feature of the model, which makes this result possible, is that decisions in a stochastic control problem are calculated in real time by boundedly rational members of an adminstration staff. The decision problem is to allocate resources in a changing environment. We consider a class of hierarchical procedures in which information about cost functions flow down and are disaggregated by the hierarchy. Nodes of the hierarchy correspond not to a single person but to decision-making units within which there may be decentralized information processing. The lower tiers of multitier hierarchies can allocate resources quickly within small groups, while higher tiers are still able to exploit gains from trade between the groups (although on the basis of older informations).

Suggested Citation

  • Timothy Van Zandt, 1997. "Real-Time Hierarchical Resource Allocation," Discussion Papers 1231, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1231
    as

    Download full text from publisher

    File URL: http://www.kellogg.northwestern.edu/research/math/papers/1231.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Williams, Steven R, 1986. "Realization and Nash Implementation: Two Aspects of Mechanism Design," Econometrica, Econometric Society, vol. 54(1), pages 139-151, January.
    2. Nahum Melumad & Dilip Mookherjee & Stefan Reichelstein, 1997. "Contract Complexity, Incentives, and the Value of Delegation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 257-289, June.
    3. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    4. Marschak, Thomas & Reichelstein, Stefan, 1998. "Network Mechanisms, Informational Efficiency, and Hierarchies," Journal of Economic Theory, Elsevier, vol. 79(1), pages 106-141, March.
    5. Kenneth R. Mount & Stanley Reiter, 1990. "A Model of Computing with Human Agents," Discussion Papers 890, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Jean-Jacques Laffont & David Martimort, 1998. "Collusion and Delegation," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 280-305, Summer.
    7. Lu Hong & Scott Page, 1994. "Reducing informational costs in endowment mechanisms," Review of Economic Design, Springer;Society for Economic Design, vol. 1(1), pages 103-117, December.
    8. Kieron Meagher & Timothy Van Zandt, 1998. "Managerial costs for one-shot decentralized information processing," Review of Economic Design, Springer;Society for Economic Design, vol. 3(4), pages 329-345.
    9. Melumad, Nahum & Mookherjee, Dilip & Reichelstein, Stefan, 1992. "A theory of responsibility centers," Journal of Accounting and Economics, Elsevier, vol. 15(4), pages 445-484, December.
    10. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-1146, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Van Zandt, Timothy, 2004. "Balancedness of Real-Time Hierarchical Resource Allocation," CEPR Discussion Papers 4276, C.E.P.R. Discussion Papers.
    2. Minyan Zhu & Antonio Peyrache, 2017. "The quality and efficiency of public service delivery in the UK and China," Regional Studies, Taylor & Francis Journals, vol. 51(2), pages 285-296, February.
    3. Oriana Bandiera & Andrea Prat & Raffaella Sadun & Julie Wulf, 2012. "Span of Control and Span of Activity," CEP Discussion Papers dp1139, Centre for Economic Performance, LSE.
    4. Andrea Patacconi, 2009. "Coordination and delay in hierarchies," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 190-208, March.
    5. Grüner, Hans Peter, 2007. "Protocol Design and (De-)Centralization," CEPR Discussion Papers 6357, C.E.P.R. Discussion Papers.
    6. Van Zandt, Timothy, 1995. "Hierarchical computation of the resource allocation problem," European Economic Review, Elsevier, vol. 39(3-4), pages 700-708, April.
    7. Van Zandt, Timothy, 2003. "Real-Time Hierarchical Resource Allocation with Quadratic Costs," CEPR Discussion Papers 4022, C.E.P.R. Discussion Papers.
    8. Dimitri Vayanos, 2003. "The Decentralization of Information Processing in the Presence of Interactions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 667-695.
    9. Castanheira, Micael & Leppämäki, Mikko, 2003. "Optimal Information Management: Organizations versus Markets," CEPR Discussion Papers 4072, C.E.P.R. Discussion Papers.
    10. Van Zandt, Timothy, 2004. "Structure and Returns to Scale of Real-Time Hierarchical Resource Allocation," CEPR Discussion Papers 4277, C.E.P.R. Discussion Papers.
    11. Kieron Meagher & Andrew Wait, 2008. "Who Decides about Change and Restructuring in Organizations?," CEPR Discussion Papers 587, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    12. Marschak, Thomas, 2006. "Organization Structure," MPRA Paper 81518, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grüner, Hans Peter, 2007. "Protocol Design and (De-)Centralization," CEPR Discussion Papers 6357, C.E.P.R. Discussion Papers.
    2. Choe Chongwoo & Park In-Uck, 2011. "Information, Authority, and Corporate Hierarchies," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-39, February.
    3. Fahad Khalil & Doyoung Kim & Jacques Lawarrée, 2013. "Contracts offered by bureaucrats," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 686-711, December.
    4. Marschak, Thomas, 2006. "Organization Structure," MPRA Paper 81518, University Library of Munich, Germany.
    5. Van Zandt, Timothy, 2003. "Real-Time Hierarchical Resource Allocation with Quadratic Costs," CEPR Discussion Papers 4022, C.E.P.R. Discussion Papers.
    6. Kim, Doyoung & Lawarree, Jacques & Shin, Dongsoo, 2004. "Exit option in hierarchical agency," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1265-1287, November.
    7. Axel GAUTIER & Dimitri PAOLINI, 2001. "Delegation and Organizational Design," LIDAM Discussion Papers IRES 2001026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Gick, Wolfgang, 2008. "Delegated contracting, information, and internal control," Economics Letters, Elsevier, vol. 101(3), pages 179-183, December.
    9. Bardhan, Pranab & Mookherjee, Dilip, 2005. "Decentralizing antipoverty program delivery in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 675-704, April.
    10. DeCanio, Stephen J. & Watkins, William E., 1998. "Information processing and organizational structure," Journal of Economic Behavior & Organization, Elsevier, vol. 36(3), pages 275-294, August.
    11. Martimort, David & Semenov, Aggey, 2008. "The informational effects of competition and collusion in legislative politics," Journal of Public Economics, Elsevier, vol. 92(7), pages 1541-1563, July.
    12. Martin Besfamille, 2000. "Fiscal federalism, local public works and corruption," CREPP Working Papers 0001, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    13. Choe, Chongwoo & Ishiguro, Shingo, 2008. "On the (Sub)optimality of Multi-tier Hierarchies: Coordination versus Motivation," MPRA Paper 13451, University Library of Munich, Germany.
    14. Tangeras, Thomas P., 2002. "Collusion-proof yardstick competition," Journal of Public Economics, Elsevier, vol. 83(2), pages 231-254, February.
    15. Michela Cella, 2011. "Monitoring subcontracting in a suppliers' hierarchy," Oxford Economic Papers, Oxford University Press, vol. 63(3), pages 523-548, July.
    16. Celik, Gorkem, 2009. "Mechanism design with collusive supervision," Journal of Economic Theory, Elsevier, vol. 144(1), pages 69-95, January.
    17. Leonardo Felli, 1996. "Preventing Collusion Through Discretion," STICERD - Theoretical Economics Paper Series /1996/303, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    18. Timothy Van Zandt, 2008. "The Interplay Between Incentives and Communication Complexity in Mechanism Design," 2008 Meeting Papers 480, Society for Economic Dynamics.
    19. Hindriks, Jean & Lockwood, Ben, 2009. "Decentralization and electoral accountability: Incentives, separation and voter welfare," European Journal of Political Economy, Elsevier, vol. 25(3), pages 385-397, September.
    20. Stefan Ambec, 2003. "A Theory of Authority in Bilateral Contracting," CSEF Working Papers 102, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

    More about this item

    Keywords

    decentralization; hierarchies; bounded rationality; real-time control;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:1231. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fran Walker (email available below). General contact details of provider: https://edirc.repec.org/data/cmnwuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.