Computation In Organizations: Comparison Of Price Mechanisms And Other Adjustment Processes

We shall be concerned in this paper with the good design of a team (Marschak and Radner) — the design of an organization whose members share certain preferences and are to respond in a desirable way to a changing environment. The discussion is partly motivated by economists’ continuing interest in the formulation of decentralized ‘price’ mechanisms to be used by planned economies, firms, and other organizations which it is helpful to view as teams. The current work on such mechanisms2 seems aimed mainly at generating more of them so as to permit previously excluded conditions such as increasing returns and certain externalities. The very difficult question of choice between alternative decentralized mechanisms or between a decentralized mechanism and a centralized alternative— the question of what characterizes a ‘good’ mechanism — has received little attention.