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

  • Grüner, Hans Peter
  • Schulte, Elisabeth

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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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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  1. 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.
  2. 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.
  3. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
  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. Prat, Andrea, 1997. "Hierarchies of Processors with Endogenous Capacity," Journal of Economic Theory, Elsevier, vol. 77(1), pages 214-222, November.
  6. 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.
  7. Philippe Jehiel, 1999. "Information Aggregation and Communication in Organizations," Management Science, INFORMS, vol. 45(5), pages 659-669, May.
  8. Meagher, Kieron J & Orbay, Hakan & Van Zandt, Timothy, 2001. "Hierarchy Size and Environmental Uncertainty," CEPR Discussion Papers 2839, C.E.P.R. Discussion Papers.
  9. 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.
  10. 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.
  11. Orbay, Hakan, 2002. "Information Processing Hierarchies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 370-407, August.
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