Policy Seminars
| Speaker: Luis Garicano |
| Speaker's Website: click here |
| Topic: Codes in Organizations |
| Date/Place/Time: Dec. 4, 2003 / Gold Hall B-313 / 4:00 P.M. to 5:30 P.M. |
| Abstract: We study the determination of specialized codes under bounded rationality, and its implications for organizations. Agents may decrease communication costs by designing codes that .t their own environment, using for example more precise words for more frequent events. Bounded rationality imposes sharply decreasing returns to scope, since when similarly skilled agents in different services must communicate with one another they must share common codes, which in turn degrades communication within each service. Thus the decision of whether to segregate services or integrate them trades of the synergies that result from better coordination between services against the loss due to the need for a common, more vague, code than the one that would optimize communication within services. Alternatively, more skilled ‘translators’ may be used to allow separate services to appropriate the synergies while keeping their own codes. A decrease in diagnosis costs leads to increasing integration among services and to the substitution of common codes for hierarchies, as common codes allow for the direct interaction among agents in different services. When adoption decisions are decentralized and non-contractible, the common code will be inefficiently biased towards the needs of early adopters and there will be too little commonality of codes. |
| Link to paper (if available): |
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