Decentralization Of Decision Research Articles

Principles of network development and evolution: an experimental study

This paper reports on an experimental investigation of the evolution of networks and the individual decision-making processes that guide it. Inasmuch as there is no history of experimental work on network formation, part of the paper is devoted to the formulation of problems that can be examined experimentally. The results are that networks, composed of decentralized decision makers, are capable of overcoming complex coordination and learning problems and converge to stationary configurations. While stationarity is frequently observed, such an achievement is not guaranteed, and when it does not occur, significant and persistent inefficiencies can result. The models of equilibration based on the principle of Nash equilibrium are more reliable than models based on the alternative principles of efficiency seeking or focalness of the network configuration. However, individual decision making within networks is not in accordance with the simple decision rule of Nash best response. Instead, we observe complicated strategies that appear to trade short-term profits in order to signal to and teach other agents the strategies required for long-term profit maximization.

Optimum Centralized Portfolio Construction with Decentralized Portfolio Management

AbstractMany financial institutions employ outside portfolio managers to manage part or all of their investable assets. It is well recognized that outside portfolio managers are unwilling to share security information with each other or with the centralized decision maker and this in general will lead to sub-optimal portfolios. In this paper, we derive an implementable set of rules under which a central decision maker can make optimal decisions without requiring decentralized decision makers to reveal estimates of security returns. Furthermore, we derive conditions under which these rules hold and when they do not hold.

Information Transparency and Coordination Failure: Theory and Experiment

ABSTRACTWe examine the effect of higher order beliefs on the ability of decentralized decision makers to coordinate and take advantage of improvements in information transparency that can increase welfare. Theories that address this question have not been empirically explored. We study coordination in a laboratory experiment with privately informed decision makers. Economic outcomes in the setting depend both on agents' rational beliefs regarding economic fundamentals and on their rational beliefs regarding the beliefs of other agents. Increasing information transparency mitigates uncertainty about economic fundamentals but may increase strategic uncertainty, precipitating multiple equilibria and less efficient group outcomes. We provide evidence that sometimes the equilibrium attained by creditors is inferior from a welfare perspective to other available equilibria. Risk dominance appears to determine equilibrium selection in our setting.

An assessment of the strengths and weaknesses of current veterinary systems in the developing world.

The changes that veterinary services have undergone in the developing world over the last two decades are expected to continue and result in the further privatisation of selected tasks, the decentralisation of decision-making and a move towards more focus on public goods service delivery by State veterinary units. At the same time, global food consumption patterns are changing in numerous ways, which will certainly affect veterinary services delivery systems. These changes include a trend towards increasing globalisation, rapidly escalating consumer demand for animal protein, intensification of livestock production into larger units and growth of the trade of livestock and livestock products. Intensification of livestock production into larger units and global trade will increase the challenges resulting from the resurgence of serious animal diseases, food safety hazards and veterinary public health-related problems. Facing and managing these challenges raises issues related to animal health delivery systems and national policies that will have to be addressed. Strengthening the capacity of State veterinary units to respond to regulatory responsibilities dictated by national laws and international World Trade Organization and OIE (World organisation for animal health) health standards will be at the centre of animal health policies in most developing countries. Creating an environment which facilitates privatised service delivery and supports subcontracting is likely to contribute to improving economic efficiency and providing wider access to veterinary services. Equally important is the issue of professional development, which must be addressed by refocusing veterinary curricula and improving professional standards. The profession will then be in a better position to serve the needs of increasing numbers of consumers.

Coordination failure as a source of congestion in information networks

Coordination failure, or agents' uncertainty about the action of other agents, may be an important source of congestion in large decentralized systems. The El Farol problem provides a simple paradigm for congestion and coordination problems that may arise with over utilization of the Internet. This paper reviews the El Farol problem and surveys previous approaches, which typically involve complex deterministic learning algorithms that exhibit chaotic-like trajectories. This paper recasts the problem in a stochastic framework and derives a simple adaptive strategy that has intriguing optimization properties; a large collection of decentralized decision makers, each acting in their own best interests and with limited knowledge, converge to a solution that (optimally) solves a complex congestion and social coordination problem. A variation in which agents are allowed access to full information is not nearly as successful. The algorithm, which can be viewed as a kind of habit formation, is analyzed using a weak convergence approach, and simulations illustrate the major results.

Decentralization of the firm: theory and evidence

Value maximization requires either that knowledge is transferred to those with the right to make decisions, or that decision rights are transferred to those who have the knowledge. A tradeoff of knowledge transfer costs and control costs is required. Characteristics of firms' investment opportunity sets (IOSs) that affect knowledge transfer costs and control costs are identified. Testable predictions about the relations between these characteristics and firms' decentralization decisions are developed and tested. The evidence presented is consistent with our predictions and is robust to different ways of measuring variables.

Temporary network of enterprises: Managing complexity by a multi-agent architecture

Present evolution of manufacturing systems is characterized by multi-firm enterprises, often organized in multi-site networks where each firm can be managed with large autonomy. As the system complexity and the number of local decision makers grow, the uncertainty of the production management seems to grow also. This paper first aims to verify whether the increasing complexity of actual manufacturing systems is going to allow an increasingly greater autonomy to local decision makers (also called ‘agents’). The scope is to show when and how local decentralized decision makers could apply efficient controls without degrading global efficiency. Then, taking into account that the final aim of an enterprise is profit, a positive relation between global system efficiency and local agents autonomy is proved.

COMMUNITY POLICING, DECENTRALIZED DECISION MAKING AND EMPLOYEE SATISFACTION

ABSTRACT Literature describing the theoretical components of community oriented policing (COP) generally hold that decentralization of decision making is a necessary attribute of any such effort. The literature further suggests that COP will increase employee satisfaction. Organizational behavior literature has claimed for some time that decentralized and collaborative decision making will improve employee satisfaction. This study tests whether decentralization and collaborative decision making techniques, employed as a portion of a COP implementation, enhance employee satisfaction. While the findings support both the hypotheses of COP and the organizational behavior literature, other factors condition the positive effect of such material.

Influence of Local Dynamic Conditions on Logistics Costs of Timber Procurement: Analyzed by Applying a Technique of Geographically Decentralized Decision Making

Timber procurement is part of the flow of wood from forest to production. In the present study, it is referred to as timber flow, which consists of logging, roadside inventory, transportation, and mill inventory functions. Local timber flows should be managed by tactical means of decentralized decision making (DDM), which are facilitated by dynamic models of a decision system. The technique consists of several hierarchical negotiation levels which can solve a local procurement problem by the technique of functionally decentralized decision making (FDDM). Models describing the system are also bigger and more complicated than models which are constructed for geographically decentralized decision making (GDDM). Consequently, the models may cause different dynamic results. Therefore, this study has two main objectives: 1) to introduce a technique of GDDM and 2) to consider the effects of the time-factor using dynamically determined functions of local procurement. Using this application, the system can be controlled for balancing timber flows, because the system's internal adjustment process is defined with higher precision; the extra costs caused by a disturbance can be diminished by adjusting the durations of local timber-flow functions. The implications of these results for improving decision making (DM) of local timber procurement in Finland are discussed.

Competing in Information-Intensive Services: Analyzing the Impact of Task Consolidation and Employee Empowerment

:We analyze the competitive and economic implications of information technology, the allocation of decision rights, and task bundling during business process reengineering. The popular reengineering literature advocates employee empowerment—decentralizing decision authority and consolidating tasks—as complementary strategies. Our analysis reveals, however, that implementing these two changes simultaneously is suboptimal in many cases. Decentralization and consolidation decisions can occur separately or together; the optimal combination depends on the effectiveness of technology aimed at skill enhancement and the customers’ sensitivity to time and quality. We identify those process parameters that can cause decentralization and consolidation to have opposite effects on process performance; we also point to other parameters, such as customer-to-customer variability, which can cause them to complement one another. Finally, we explain why, in a time-based competitive marketplace, firms are more likely to centralize their decision-making process while concentrating their information technology investments on enhancing productivity and intraorganizational communications.

Cellular Automata and Urban Form: A Primer

Artificial processes for locating urban activities based on simple rules pertaining to local circumstances give rise to complex global patterns that mirror the spatial organization of cities. These systems are called Cellular Automata (CA). They provide a useful means of articulating the way highly decentralized decision-making can be employed in simulating and designing robust urban forms. CA can be easily programmed in a variety of software, and as such provide a suggestive way of exploring actual as well as optimal patterns and plans. This primer provides a pedagogic guide to these ideas and to potential computer applications.

Labour Markets and Organisational Change

Flexible manufacturing systems, team work with decentralisation of decision-making, integration of tasks and multiple allocation across functional barriers demand a skilled work force prepared for continuous learning and adaptation. It is common to see a younger, well-educated and trained work force as being required for such a production environment. A closer empirical look at most of the internal labour markets in this study shows that existing labour market structures do not match this image. Existing labour markets consist very often of an older (and ageing) labour force with relatively low skills and with resistance to continuous training. These structural features have, over the last ten years — despite the existence of costly early retirement measures and new entries into internal labour markets — not much improved, and in many cases have even deteriorated.

The Hierarchical Organization of Management in the Firm: Economic Reasons and Efficient Structures

Based on analysis of organizational aspects of data processing in decision making, an economic explanation of hierarchical organization of management in firm is provided. Contrary to prevailing opinion that the explanation of hierarchy may in many cases be more sociological and psychological than purely economic in mainstream sense (Radner, 1992, p. 1384) paper shows that decreasing returns to scale in information processing is a necessary condition for hierarchical organization of management in business firms. However, decentralization of decision-making is desirable only if an additional (sufficient) condition is satisfied, i.e., if information workload of decision-making sector is sufficiently large. Moreover, paper shows that specific features of human information-processing in firm such as disagreement about goals of data analysis or possibility of random errors do not imply a hierarchical organization of management, but could change forms of efficient decision-making structures. Finally, contrary to results recently presented in economic literature, paper shows that in firm, unlike in computer systems, there is no unique architecture for efficient information-processing structures, but a number of various efficient forms can be observed.

A Sea Story: Implementing the Navy's Personnel Assignment System

During its operational test and evaluation, despite top management support and significant technical achievements, a personnel assignment model implemented for the United States Navy to support assignment decisions experienced overwhelming resistance from the users, the 200 or so enlisted detailers, located at the Bureau of Naval Personnel in Washington, D.C. Our MS/OR research team had neglected to assess the negative impact of the personnel assignment model on an important detailing function: assignment negotiations or bargaining between the detailers and their customers, the service members. By involving the detailers in revising the model and making the failings of the old model the strengths of the new model, we turned certain failure into a successful program. By managing the behavioral aspects of the implementation with special emphasis on problem identification and requirements structuring, we overcame the difficulties of introducing change to a largely manual and highly decentralized decision process and we compare lessons learned with the experiences of other implementers.

Decentralization or Centralization

An Executive Vice President for Nursing can provide the necessary link to meet diverse clinical demands when encountering centralization--decentralization decisions. Centralized communication links hospital departments giving nurses a unified voice. Decentralization acknowledges the need for diversity and achieves the right balance of uniformity through a responsive communications network.

Externalities, incentives, and failure to achieve national objectives in decentralized economies

This paper studies why decentralized economies often fail to achieve national objectives. We assume that the central government allocates its tax revenues among a large number of decision makers (provincial authorities or ministers). Decision makers are facing a soft budget constraint because of limited monitoring by the central authorities. Spending in excess to allocations fuels inflation. Cooperation to limit aggregate spending occurs when no decision maker can benefit by opportunistic behavior. Adverse macroeconomic shocks are shown to reduce the likelihood that decentralized decision makers will cooperate in order to achieve national objectives. Debt relief can induce higher investment because it can promote a shift from opportunistic behavior to cooperation.

Decentralized Strategies for Input Flow Routing in Computer Communication Networks

The routing problem in computer communication networks which is considered in the paper is characterized by the following features: i) routing decisions are taken only at the input nodes to the network; ii) the input nodes act as decentralized decision makers, without any information exchange; iii) the objective of the routing problem is that of minimizing over the entire network an aggregate cost made up with single link costs which are quadratic in the link flow. The single node strategy is a function of the node information, which is simply the level of the incoming flow. Since no information exchange is supposed to take place in the network among the decision nodes, the considered routing problem induces a static team decision problem. In the paper it is shown how the strategies of the decision makers are actually coupled only through a finite set of parameters, due to the particular structure of the problem considered. These parameters correspond to the average flows assigned to the various paths and they can be found by solving a set of equations which take into account the solution of each decision maker's personal problem and the a-priori distribution of the incoming flows.

Decentralization decisions in bureaucracies as a principal-agent problem

In this paper a positive theory of internal bureaucratic decision-making is presented. A model is formulated to explain why some decisions within a public bureaucracy are decentralized, while others are not. The explanation, using the notions of principal-agent theory, involves such factors as different access to information and different objectives of central and decentral actors. An empirical test of the model is carried out using data on decisions of local government in the Netherlands on capacity reductions in hospitals.

Glasnost, perestroika and Eastern Europe

The dramatic economic and political reforms taking place in the Soviet Union under the leadership of Mikhail Gorbachev are intimately connected with changes in Eastern Europe. Some of the Soviet reforms have been inspired by reforms in Eastern Europe; some are being pressed on the East Europeans, often in the face of reluctance or even outright hostility from East European leaders. However that may be, if Soviet-style refogrms are implemented in some of the East European states, there could be fundamental changes in the ways those societies are organized and run. Mr Gorbachev calls his reform programme for the Soviet Union 'restructuring' or perestroika. The economic side of perestroika includes a reduction in the role of central planning, the decentralization of decision-making, an expanded role for market mechanisms, and increased opportunities for private initiative in services and production. The political side includes greater openness and publicity in the media (glasnost), greater 'pluralism' of opinions in the political arena, competitive and secret elections for state (and perhaps even Party) bodies, and an enhanced political role for workers in state enterprises through 'self-management' and employee selection of managers and directors. Many of these ideas have already been advocated by reformers and dissidents in Eastern Europe. But past efforts to apply them have sometimes led to severe repression, as in Poland in 1981, or Soviet intervention, as in Czechoslovakia in 1968. The chances of such reforms succeeding now, with a Soviet leadership in place that is supportive rather than sceptical and fearful, are of course much greater.1 But even if substantial reforms in Eastern Europe do not take place, the 'new thinking' in the Soviet Union still promises dramatic and perhaps even revolutionary change in the nature of Soviet-East European relations. Gorbachev and his Politburo colleagues have called on the East European leaders to abandon old ways. They have begun to redefine the relationship between Moscow and the capitals of Eastern Europe. 'Socialist internationalism', the standard formula that was used to justify the Soviet interventions in Czechoslovakia and Afghanistan and which formed the core of the Brezhnev Doctrine of limited sovereignty, now seems to be being down-played. If the Soviet leaders mean what they say, and if the East Europeans take them at their word, Eastern Europe will move even further along the road of polycentrism as a result of the Soviet reform initiative. Furthermore, change and reform in Eastern Europe are likely to feed back into the Soviet Union, further accelerating the reform process there.

Conflicting experiences with DSS

The concept of DSS is clearly attracting a lot of interest. Although this should be welcomed, it does not signify that the concept is well-defined and well-established. Above, we may observe that empirical evidence on the effectiveness of DSS is not overwhelmingly positive, and is often conflicting. Many DSS focus on problem-solving, not on problem-identification. Many DSS are constructed around aggregated data, separated from primary, transaction processing data. However, it is shown in several studies that use of this type of data may be dangerous for decision-making. With regard to the model component of many decision-making. With regard to the model component ‘equation’ type. These models are only applicable under the assumption that the equations can be filled in and that they give a valid description of reality. This assumption seems to hold only in a very few case. A way out can be found in the application of models of the discrete event or ‘process’ type. A frequently encountered approach for the development of DSS is an evolutionary, step-wise one. However, such an approach is not necessarily converging. Especially personalized DSS demand a strong project management to avoid a chaos of hardware, software, personal files and models. Decentralization of decision-making and computing does not guarantee a better co-ordination of the workstations of individual information workers. We propose to use the concept DSS in a more narrow sense of an environment to support decision making, encompassing a language system, a knowledge system and a problem processing system. The language system is based on an object-oriented representation form. The problem processing system and the knowledge system bear heavily on the process type system specification.