Speed and quality of collective decision making: Imperfect information processing

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.

[1]  Philippe Jehiel,et al.  Information Aggregation and Communication in Organizations , 1999 .

[2]  Elisabeth Schulte,et al.  Speed and Quality of Collective Decision Making: Incentives for , 2004 .

[3]  J. Stiglitz,et al.  The Architecture of Economic Systems: Hierarchies and Polyarchies , 1984 .

[4]  Andrea Prat.  Hierarchies of Processors with Endogenous Capacity , 1997 .

[5]  R. Radner.  Hierarchy: The Economics On Managing , 1990 .

[6]  Hakan Orbay,et al.  Information Processing Hierarchies , 2002, J. Econ. Theory.

[7]  Timothy Van Zandt.  Balancedness of Real-Time Hierarchical Resource Allocation , 2004 .

[8]  R. Duncan Luce,et al.  Individual Choice Behavior , 1959 .

[9]  Timothy Van Zandt,et al.  The scheduling and organization of periodic associative computation: Efficient networks , 1997 .

[10]  Wojciech Rytter,et al.  Efficient parallel algorithms , 1988 .

[11]  Kieron Meagher,et al.  Hierarchy, Size, and Environmental Uncertainty , 2001 .

[12]  Timothy Van Zandt.  The scheduling and organization of periodic associative computation: Efficient networks , 1998 .

[13]  Kieron Meagher,et al.  Managerial costs for one-shot decentralized information processing , 1998 .

[14]  R. Radner.  The organization of decentralized information processing , 1993 .

[15]  Elisabeth Schulte,et al.  Speed and Quality of Collective Decision-Making Ii: Incentives for Information Provision , 2004 .

[16]  R. Radner.  Hierarchy: The Economics of Management , 1992 .