Committees, hierarchies and polyarchies
Raaj Kumar Sah and Joseph E. Stiglitz
Economic Journal, Volume 98, Number 391, June 1988, pages 451-470.
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This paper examines optimal decision making under three different organizational forms: committees, hierarchies, and polyarchies. Focus is on the trade-off between errors of rejecting good projects versus errors of accepting bad projects, and on the trade-off between gains from more extensive evaluations of projects versus costs of evaluation. The authors characterize the optimal sizes of these organizations (as well as the optimal level of consensus in committees), and then analyze how these optima change under different organizational environments. They also analyze the influence of organizational environment on the relative performance of these alternative organizational forms. (This abstract is from: Journal of Economic Literature, Volume 26, Number 4, December 1988, page 2070)
Previous working versions include:
“Economics of committees.” Yale University, School of Organization & Management. Economics of organization, Working paper series D, Working paper number 10. June 1985.