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Organizational Economics with Cognitive Costs

  • Garicano, Luis
  • Prat, Andrea

Organizational economics has advanced along two parallel tracks, one concerned with motivating agents with diverging objectives, the other--less developed--with coordinating agents under cognitive limits. This survey focuses on the second strand and attempts to bring the two strands together. Organizations are viewed as responses to the cognitive costs faced by their (potential) members. We review existing approaches such as team theory, hierarchies of processors, organizational languages and knowledge hierarchies and we argue that they can help us address an array of important organizational issues. We also review recent developments in the application of these ideas: exploiting complexity measures, combining team theory and contract theory, applying organization theories in labor economics, and using these theories to interpret the wealth of activity data that is becoming available.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8372.

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Date of creation: May 2011
Handle: RePEc:cpr:ceprdp:8372
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  1. Prat, Andrea, 2002. "Should a team be homogeneous?," European Economic Review, Elsevier, vol. 46(7), pages 1187-1207, July.
  2. Luis Garicano & Esteban Rossi-Hansberg, 2005. "Organization and Inequality in a Knowledge Economy," NBER Working Papers 11458, National Bureau of Economic Research, Inc.
  3. Madarász, Kristóf & Prat, Andrea, 2010. "Screening with an Approximate Type Space," CEPR Discussion Papers 7900, C.E.P.R. Discussion Papers.
  4. Prat, Andrea & de Martí, Joan & Calvó-Armengol, Antoni, 2015. "Communication and influence," Theoretical Economics, Econometric Society, vol. 10(2), May.
  5. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
  6. Mathias Dewatripont & Jean Tirole, 2005. "Modes of communication," ULB Institutional Repository 2013/9631, ULB -- Universite Libre de Bruxelles.
  7. Jacques Cremer & Luis Garicano & Andrea Prat, 2006. "Language and the Theory of the Firm," Levine's Bibliography 784828000000000373, UCLA Department of Economics.
  8. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  9. Crémer, Jacques & Garicano, Luis & Prat, Andrea, 2004. "Codes in Organizations," CEPR Discussion Papers 4205, C.E.P.R. Discussion Papers.
  10. Bloom, Nicholas & Garicano, Luis & Sadun, Raffaella & Van Reenen, John, 2013. "The distinct effects of Information Technology and Communication Technology on firm organization," CEPR Discussion Papers 9762, C.E.P.R. Discussion Papers.
  11. Brynjolfsson, Erik. & Hitt, Lorin M., 1995. "Paradox lost? : firm-level evidence on the returns to information systems spending," Working papers 3786-95., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  12. Piccione, Michele & Rubinstein, Ariel, 1997. "On the Interpretation of Decision Problems with Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 3-24, July.
  13. Volij, Oscar & Palacios-Huerta, Ignacio, 2004. "The Measurment of Intellectual Influence," Staff General Research Papers Archive 10797, Iowa State University, Department of Economics.
  14. 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.
  15. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
  16. Casey Ichniowski & Kathryn Shaw & Giovanna Prennushi, 1995. "The Effects of Human Resource Management Practices on Productivity," NBER Working Papers 5333, National Bureau of Economic Research, Inc.
  17. Nick Bloom & John Van Reenen, 2006. "Measuring and explaining management practices across firms and countries," LSE Research Online Documents on Economics 733, London School of Economics and Political Science, LSE Library.
  18. Jacques Cremer, 1980. "A Partial Theory of the Optimal Organization of a Bureaucracy," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 683-693, Autumn.
  19. 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.
  20. Hurwicz, Leonid, 1973. "The Design of Mechanisms for Resource Allocation," American Economic Review, American Economic Association, vol. 63(2), pages 1-30, May.
  21. Palacios-Huerta, Ignacio & Prat, Andrea, 2010. "Measuring the Impact Factor of Agents within an Organization Using Communication Patterns," CEPR Discussion Papers 8040, C.E.P.R. Discussion Papers.
  22. James Dow, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 1-14.
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