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Optimal Information Transmission in Organizations: Search and Congestion

Author

Listed:
  • Álex Arenas
  • Antonio Cabrales
  • Leon Danon
  • Albert Díaz-Guilera
  • Roger Guimerà
  • Fernando Vega-Redondo

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.

Suggested Citation

  • Álex Arenas & Antonio Cabrales & Leon Danon & Albert Díaz-Guilera & Roger Guimerà & Fernando Vega-Redondo, 2003. "Optimal Information Transmission in Organizations: Search and Congestion," Working Papers 64, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:64
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    References listed on IDEAS

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    1. Mathias Dewatripont & Patrick Bolton, 1994. "The firm as a communication network," ULB Institutional Repository 2013/9595, ULB -- Universite Libre de Bruxelles.
    2. A. W. Beggs, 2001. "Queues and Hierarchies," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 297-322.
    3. 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 716-727, September.
    4. Visser, Bauke, 2000. "Organizational communication structure and performance," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 231-252, June.
    5. Timothy van Zandt, 1999. "Real-Time Decentralized Information Processing as a Model of Organizations with Boundedly Rational Agents," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 633-658.
    6. Timothy Van Zandt & Roy Radner, 1998. "Real-Time Decentralized Information Processing and Returns to Scale," Discussion Papers 1233, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. 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.
    8. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 809-839.
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    Citations

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    Cited by:

    1. Antoni Rubí-Barceló, 2012. "Core/periphery scientific collaboration networks among very similar researchers," Theory and Decision, Springer, vol. 72(4), pages 463-483, April.
    2. Zenou, Yves & König, Michael D. & Tessone, Claudio J., 2014. "Nestedness in networks: A theoretical model and some applications," Theoretical Economics, Econometric Society, vol. 9(3), September.
    3. repec:wsi:acsxxx:v:13:y:2010:i:04:n:s0219525910002700 is not listed on IDEAS
    4. Nils Roehl, 2013. "Two-Stage Allocation Rules," Working Papers Dissertations 01, Paderborn University, Faculty of Business Administration and Economics.
    5. 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.
    6. M. Koenig & Claudio J. Tessone & Yves Zenou, "undated". "A Dynamic Model of Network Formation with Strategic Interactions," Working Papers CCSS-09-006, ETH Zurich, Chair of Systems Design.
    7. 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.
    8. Benjamin Golub & R. McAfee, 2011. "Firms, queues, and coffee breaks: a flow model of corporate activity with delays," Review of Economic Design, Springer;Society for Economic Design, vol. 15(1), pages 59-89, March.
    9. Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro, 2013. "Hierarchical cheap talk," Theoretical Economics, Econometric Society, vol. 8(1), January.
    10. Mario Maggioni & Teodora Uberti & Mario Nosvelli, 2014. "Does intentional mean hierarchical? Knowledge flows and innovative performance of European regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(2), pages 453-485, September.
    11. Nils Roehl, 2013. "Two-Stage Allocation Rules," Working Papers CIE 73, Paderborn University, CIE Center for International Economics.

    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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