Coordination in Centralized and Decentralized Systems

15 Pages Posted: 1 May 2015 Last revised: 5 Mar 2017

See all articles by Vipin P. Veetil

Vipin P. Veetil

Indian Institute of Technology Madras

Date Written: March 5, 2017

Abstract

We study a simple coordination problem to understand the difference between centralized and decentralized economic systems. The decentralized system is more robust than the centralized system to communication errors. But the centralized system takes less time than the decentralized system to create coordination among constituent parts. Decentralization is preferable when there is little urgency, when there is need to prevent system-collapse, and when the constituent parts are more likely to make communication errors.

Keywords: Coordination; Information; Communication; Errors; Organization; Centralization; Decentralization; Markets; Firms; Fragility; Robustness; Time

JEL Classification: D21, D22, L11, L22, P10

Suggested Citation

Veetil, Vipin P., Coordination in Centralized and Decentralized Systems (March 5, 2017). Available at SSRN: https://ssrn.com/abstract=2600735 or http://dx.doi.org/10.2139/ssrn.2600735

Vipin P. Veetil (Contact Author)

Indian Institute of Technology Madras

Chennai
India

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