Committees, hierarchies and polyarchies
Raaj Kumar Sah
University of Chicago
Joseph E. Stiglitz
Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)
Economic Journal, Volume 98, Number 391, June 1988, pages 451-470
Princeton University, Department of Economics, Woodrow Wilson School of Public & International Affairs, John M. Olin Program for the Study of Economic Organization and Public Policy, Discussion Paper No. 5
This paper examines optimal decision making under three different organizational forms: committees, hierarchies and polyarchies. Our 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. We 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. We also analyze the influence of organizational environment on the relative performance of these alternative organizational forms.
Number of Pages in PDF File: 38
Keywords: Committees, Organization, Hierarchy, Polyarchy
JEL Classification: D20, D21, D23, D70, D71, L22Accepted Paper Series
Date posted: May 22, 2012 ; Last revised: June 26, 2012
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