Summary of the project:
Andrea Prat - Research Proposal: Modeling Organizations as Networks of Processors Abstract
Information processing is an increasingly important activity in all organizations but until recently it had not found a systematic formalization. Radner (1993) and Bolton and Dewatripont (1994) proposed to study information processing by modeling the organization as a network of processors. Each agent is represented as a processor with limited computing capacity. Prat (1997) has extended the approach to include processors with heterogenous and endogenous capacity. This research applies such approach to characterize several properties of efficient network of processors. Particular attention will be given to: (1) the existence of diminishing returns to scale; (2) the optimal mode of coordination; (3) the tradeoff between size and delay; (4) the endogenous differences in abilities and competencies among the agents who work in the organization: and (5) the effects of the adoption of information technology (IT). The research aims at relating the results on efficient networks of processors with the practices of real organizations.