Optimal Information Transmission in Organizations: Search and Congestion

27 Pages Posted: 29 Aug 2003  

Alex Arenas

Universitat Rovira i Virgili - Departament d'Enginyeria Informatica i Matematiques

Antonio Cabrales

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Albert Diaz-Guilera

University of Barcelona

Roger Guimera

Northwestern University - Department of Chemical Engineering

Fernando Vega-Redondo

Universidad de Alicante - Department of Economic Analysis

Date Written: May 2004

Abstract

We propose a stylized model of a problem-solving organization whose internal communication structure is given by a fixed network. Problems arrive randomly anywhere in this network and must find their way to their respective "specialized solvers" by relying on local information alone. The organization handles multiple problems simultaneously. For this reason, the process may be subject to congestion. We provide a characterization of the threshold of collapse of the network and of the stock of floating problems (or average delay) that prevails below that threshold. We build upon this characterization to address a design problem: the determination of what kind of network architecture optimizes performance for any given problem arrival rate. We conclude that, for low arrival rates, the optimal network is very polarized (i.e. star-like or "centralized"), whereas it is largely homogenous (or "decentralized") for high arrival rates. We also show that, if an auxiliary assumption holds, the transition between these two opposite structures is sharp and they are the only ones to ever qualify as optimal.

Keywords: Networks, information transmission, search, organization design

JEL Classification: D20, D24, D83, L22, L23

Suggested Citation

Arenas, Alex and Cabrales, Antonio and Diaz-Guilera, Albert and Guimera, Roger and Vega-Redondo, Fernando, Optimal Information Transmission in Organizations: Search and Congestion (May 2004). FEEM Working Paper No. 77.04; UPF Economics and Business Working Paper No. 698. Available at SSRN: https://ssrn.com/abstract=433861 or http://dx.doi.org/10.2139/ssrn.433861

Alex Arenas

Universitat Rovira i Virgili - Departament d'Enginyeria Informatica i Matematiques ( email )

Campus Sescelades
Avinguda dels Països Catalans, 26
43006 Tarragona
Spain

Antonio Cabrales (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 65 (Phone)
(34-93) 542 17 46 (Fax)

Albert Diaz-Guilera

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Roger Guimera

Northwestern University - Department of Chemical Engineering ( email )

2145 Sheridan
Evanston, IL 60208-1230
United States

Fernando Vega-Redondo

Universidad de Alicante - Department of Economic Analysis ( email )

Apdo. Correos, 99
03080 Alicante
Spain
+34 96 590 3616 (Phone)
+34 96 590 3898 (Fax)

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