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Optimal Information Transmission in Organizations: Search and Congestion

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  • Antonio Cabrales

    (Departament d’Economia i Empresa, Universitat Pompeu Fabra)

  • Àlex Arenas

    (Departament d’Enginyeria Informàtica i Matemàtiques, Universitat Rovira i Virgili)

  • Albert Díaz-Guilera

    (Departament de Física Fonamental, Universitat de Barcelona)

  • Roger Guimerà

    (Department of Chemical Engineering, Northwestern University)

  • Fernando Vega-Redondo

    (Departament de Fonaments de l’Anàlisi Econòmica, Universitat d’Alacant)

Abstract

We propose a stylized model of a problem-solving organization whose internal communication structure is given by a fixed network. Problems arrive randomly anywhere in this network and must find their way to their respective “specialized solvers” by relying on local information alone. The organization handles multiple problems simultaneously. For this reason, the process may be subject to congestion. We provide a characterization of the threshold of collapse of the network and of the stock of floating problems (or average delay) that prevails below that threshold. We build upon this characterization to address a design problem: the determination of what kind of network architecture optimizes performance for any given problem arrival rate. We conclude that, for low arrival rates, the optimal network is very polarized (i.e. star-like or “centralized”), whereas it is largely homogenous (or “decentralized”) for high arrival rates. We also show that, if an auxiliary assumption holds, the transition between these two opposite structures is sharp and they are the only ones to ever qualify as optimal. Keywords: Networks, information transmission, search, organization design.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.77.

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Date of creation: May 2004
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Handle: RePEc:fem:femwpa:2004.77

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Keywords: Networks; Information transmission; Search; Organization design;

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References

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  1. Mathias Dewatripont & Patrick Bolton, 2004. "The firm as a communication network," ULB Institutional Repository 2013/9599, ULB -- Universite Libre de Bruxelles.
  2. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
  3. Beggs, A W, 2001. "Queues and Hierarchies," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 297-322, April.
  4. Van Zandt, Timothy, 1999. "Real-Time Decentralized Information Processing as a Model of Organizations with Boundedly Rational Agents," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 633-58, July.
  5. Visser, Bauke, 2000. "Organizational communication structure and performance," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 231-252, June.
  6. 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.
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Cited by:
  1. Benjamin Golub & R. McAfee, 2011. "Firms, queues, and coffee breaks: a flow model of corporate activity with delays," Review of Economic Design, Springer, vol. 15(1), pages 59-89, March.
  2. Antoni Rubí-Barceló, 2008. "Scientific collaboration networks: how little differences can matter a lot," DEA Working Papers 30, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  3. Michael Koenig & Claudio Tessone & Yves Zenou, 2012. "Nestedness in Networks: A Theoretical Model and Some Applications," Discussion Papers 11-003, Stanford Institute for Economic Policy Research.
  4. M. Koenig & Claudio J. Tessone & Yves Zenou, . "A Dynamic Model of Network Formation with Strategic Interactions," Working Papers CCSS-09-006, ETH Zurich, Chair of Systems Design.
  5. Michael D. König & Claudio J. Tessone & Yves Zenou, 2010. "From Assortative To Dissortative Networks: The Role Of Capacity Constraints," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 483-499.
  6. Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro, 2013. "Hierarchical cheap talk," Theoretical Economics, Econometric Society, vol. 8(1), January.
  7. repec:pdn:wpaper:73 is not listed on IDEAS

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