THE ORGANIZATION OF DECENTRALIZED INFORMATION-PROCESSING

In a decision-theoretic model of a firm, I represent managers as information processors of limited capacity; efficiency is measured in terms of the number of processors and the delay between the receipt of information by the organization and the implementation of the decision. I characterize efficient networks for both one-shot and repeated regimes, as well as the corresponding ''production function'' relating the number of items processed to the number of processors and the delay. I sketch some applications to common decision paradigms, and implications for decentralization and organizational returns to scale.