Publication Type
Working Paper
Version
publishedVersion
Publication Date
8-2004
Abstract
We present a general framework to study the project selection problem in an organization of fallible decision-makers. We show that when the organizational size and the majority rule for project acceptance are optimized simultaneously, the optimal quality of decision-making, as determined by the decision criterion, is invariant, and depends only on the expertise of decision-makers. This result clarifies that the circumstances under which the decision-making quality varies with the organizational structure are situations where the organizational size or majority rule is restricted from reaching the optimal level. Moreover, in contrast to earlier findings in the literature that the hierarchy and the polyarchy are generally sub-optimal structures, we show that when the size, structure and decision criterion are simultaneously optimized, the hierarchy and the polyarchy are in fact the only possible optimal organizational structures when decision-making costs are present.
Discipline
Industrial Organization
Research Areas
Applied Microeconomics
Volume
18-2004
First Page
1
Last Page
18
Publisher
SMU Economics and Statistics Working Paper Series, No. 18-2004
City or Country
Singapore
Citation
KOH, Winston T. H..
The Optimal Design of Fallible Organizations: Invariance of Optimal Decision Criterion and Uniqueness of Hierarchy and Polyarchy Structures. (2004). 18-2004, 1-18.
Available at: https://ink.library.smu.edu.sg/soe_research/791
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Published in Social Choice and Welfare, 2005, 25 (1), pp. 207-220. https://doi.org/10.1007/s00355-005-0055-1