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Speed and Quality of Collective Decision-Making, I: Imperfect Information Processing

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  • Grüner, Hans Peter
  • Schulte, Elisabeth

Abstract

A group of P identical managers has to make a choice between N alternatives. They benefit from reaching the decision quickly. In order to learn which is the best option, the alternatives have to be compared. A manager is able to identify the better one of two alternatives only with a certain probability. This Paper compares three different hierarchy designs with respect to decision quality: two strictly balanced hierarchies and the fastest hierarchy, which is the skip-level reporting tree proposed by Radner (1993). The latter hierarchy design is found to outperform the two others not only in terms of speed and cost but also in terms of decision quality.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4179.

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Date of creation: Feb 2004
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Handle: RePEc:cpr:ceprdp:4179

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Keywords: bounded rationality; hierarchies; information processing;

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References

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  1. Timothy Van Zandt, 1998. "The scheduling and organization of periodic associative computation: Efficient networks," Review of Economic Design, Springer, vol. 3(2), pages 93-127.
  2. Hans Peter Grüner & Elisabeth Schulte, 2004. "Speed and Quality of Collective Decision Making: Incentives for," Levine's Bibliography 122247000000000417, UCLA Department of Economics.
  3. Kieron Meagher & Timothy Van Zandt, 1998. "Managerial costs for one-shot decentralized information processing," Review of Economic Design, Springer, vol. 3(4), pages 329-345.
  4. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
  5. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-27, September.
  6. Orbay, Hakan, 2002. "Information Processing Hierarchies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 370-407, August.
  7. Prat, Andrea, 1997. "Hierarchies of Processors with Endogenous Capacity," Journal of Economic Theory, Elsevier, vol. 77(1), pages 214-222, November.
  8. Timothy Van Zandt, 1997. "The scheduling and organization of periodic associative computation: Essential networks," Review of Economic Design, Springer, vol. 3(1), pages 15-27.
  9. Grüner, Hans Peter & Schulte, Elisabeth, 2004. "Speed and Quality of Collective Decision-Making II: Incentives for Information Provision," CEPR Discussion Papers 4397, C.E.P.R. Discussion Papers.
  10. Meagher, Kieron & Orbay, Hakan & Van Zandt, Timothy, 2001. "Hierarchy Size and Environmental Uncertainty," CEPR Discussion Papers 2839, C.E.P.R. Discussion Papers.
  11. Philippe Jehiel, 1999. "Information Aggregation and Communication in Organizations," Management Science, INFORMS, vol. 45(5), pages 659-669, May.
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Citations

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Cited by:
  1. Grüner, Hans Peter & Schulte, Elisabeth, 2010. "Speed and quality of collective decision making: Incentives for information provision," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 734-747, December.
  2. Grüner, Hans Peter, 2009. "Information technology: Efficient restructuring and the productivity puzzle," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 916-929, December.
  3. Cho, Myeonghwan, 2010. "Efficient structure of organization with heterogeneous workers," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1125-1139, November.
  4. Hans Peter Grüner & Elisabeth Schulte, 2004. "Speed and Quality of Collective Decision Making: Incentives for," Levine's Bibliography 122247000000000417, UCLA Department of Economics.
  5. Grüner, Hans Peter, 2007. "Protocol Design and (De-)Centralization," CEPR Discussion Papers 6357, C.E.P.R. Discussion Papers.

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