Munich Personal RePEc Archive

Organization Structure

Marschak, Thomas (2006): Organization Structure. Published in: Handbook of Economics and Information Systems , Vol. 2006, : pp. 205-290.

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This Chapter concerns formal models of organizations that regularly acquire information about a changing environment in order to find actions which are appropriate to the new environment. Some or all members of the organization are specialists. Each of them privately learns something about a particular aspect of the new environment. The organization operates a {\it mechanism}, which assembles relevant pieces of the specialists' private observations and uses the assembled information to obtain the desired new action. The mechanism has various informational costs and they are measured in a precise way. The research seeks to characterize mechanisms that strike an appropriate balance between informational cost and the performance of the mechanism's final actions. As costs drop, due to improved Information Technology, the properties of good mechanisms, and hence the structure of the organizations that adopt them, may change. The Chapter starts by examining research in which the organization's members reliably follow the mechanism's rules and so incentives are not an issue. It then turns to research in which each member is self-interested and needs an inducement in order to make the informational efforts that the mechanism requires. A number of unmet Research Challenges are identified.

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