Citation

Discussion Paper Details

Please find the details for DP4022 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Real-Time Hierarchical Resource Allocation with Quadratic Costs

Author(s): Timothy Van Zandt

Publication Date: August 2003

Keyword(s): bounded rationality, decentralization, hierarchies, real-time computation and resource allocation

Programme Area(s): Industrial Organization

Abstract: This Paper presents a model in which boundedly rational members of an administrative staff calculate resource allocations in real time. We consider a class of hierarchical procedures in which information about payoff functions flows up and is aggregated by a hierarchy, while allocations flow down and are disaggregated by the hierarchy with decentralized decision making. We assume that the payoff functions are quadratic and that the payoff parameters follow first-order autoregressive processes. We define a team statistical optimality condition that formalizes the notion of decentralized decision making. We derive a reduced form that can be used to address specific questions about organizational structure and returns to scale.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4022

Bibliographic Reference

Van Zandt, T. 2003. 'Real-Time Hierarchical Resource Allocation with Quadratic Costs'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4022