Real-Time Hierarchical Resource Allocation with Quadratic Costs
نویسنده
چکیده
This paper presents a model in which resource allocation are calculated in real-time by boundedly rational members of an administrative staa. We consider a class of hierarchical procedures in which information about cost functions ows up and is aggregated by a hierarchy, while allocations ow down and are disag-gregated by the hierarchy. We assume that the cost functions are quadratic and that the cost parameters follow rst-order autoregressive processes, and thereby derive a tractable reduced form. The model distinguishes between decentralized information processing and decentralized decision making in organizations, and shows that decentralized decision making can be advantageous due to information processing delay, even in the absence of information transmission costs. The reduced form can be used to address speciic questions about organizational structure and returns to scale.
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