Committees, hierarchies and polyarchies

Abstract

This paper examines optimal decision making under three different organizational forms: committees, hierarchies, an d polyarchies. Focus is on the trade-off between errors of rejecting good projects versus errors of accepting bad projects, and on the tra de-off between gains from more extensive evaluations of projects vers us costs of evaluation. The authors characterize the optimal sizes of these organizations (as well as the optimal level of consensus in co mmittees), and then analyze how these optima change under different o rganizational environments. They also analyze the influence of organi zational environment on the relative performance of these alternative organizational forms. Copyright 1988 by Royal Economic Society.