Skip to main content
main-content

Über dieses Buch

This book is the cuhnination of many years' research inspired by the pioneering and seminal works of Sah and Stiglitz. We gratefully acknowledge the influence of these two authors, whose ideas and contributions have brought us together on this collabo­ ration, despite our divergent scientific backgrounds (while Catalani is interested in quantitative methods, Clerico is a non-quantitative economist) . We thank the Editor of the Rivista Internazionale di Scienze Economiche e Commerciali for permission to use slightly modified versions of papers published in that Review (they are the content of Chapters I and III of Part I, and of Chapter I of Part II). We heartily thank Ms. Laura McLean for carefully revising our English. The publication of this book has been made possible by a grant from the Department of Economics, University of Turin, Italy. Torino, July 1995 Mario S. Catalani Giuseppe F. CIeri co CONTENTS Introduction 1 PART I Some models of decision making structures I. How and when unanimity is a superior decision rule 15 II. Majority rules and efficiency of the decision process 31 III. Team cooperation vs. independent assessment 41 IV. Leadership and dependence 59 V. The decision making process of political organizations 75 PART II Pyramid decision structures I. Pyramidal structures: a preliminary note 91 II. Other properties of pyramids 103 III. Pyramids and dependence 117 IV. Organization, loyalty, and efficiency 133 Conclusions 151 References 163 Mario S.

Inhaltsverzeichnis

Frontmatter

Introduction

Introduction

The Fallibility of Human Organizations
Abstract
This Introduction does not aim to present an overall review of the literature on the problems related to the decision process of organizations nor to provide an exhaustive survey of the issues inherent to such problems. Neither does it offer the reader any discussion on the nature or source of human fallibility. Instead it intends to describe the context into which our analysis of the decision processes and of the decision making organizations will be fitted.
Mario S. Catalani, Giuseppe F. Clerico

Some Models of Decision Making Structures

Frontmatter

Chapter I. How and When Unanimity is a Superior Decision Rule

Abstract
The kind of problems we are going to deal with can be described briefly as follows.
Mario S. Catalani, Giuseppe F. Clerico

Chapter II. Majority Rules and Efficiency of the Decision Process

Abstract
Daily experience in different fields shows that in the case of dichotomous decisions, the consequences of which might be particularly important, the decision body normally does not choose according to a simple majority, but according to a special (qualified) majority, or unanimity. For example. Democratic Parliaments act mostly according to a qualified majority in the case of amendments of the Constitutional Chart, as does the Board of Directors of a corporation when deciding on strategic matters such as mergers, changes of the charter and so on.
Mario S. Catalani, Giuseppe F. Clerico

Chapter III. Team Cooperation vs. Independent Assessment

Abstract
The essential goal of this chapter is to analyse the following situation: provided that someone (an entrepreneur, a dictator and so on) decides to ask someone else for advice in order to reach a correct decision, should she organise a decision structure that acts cooperatively or independently? For example, an entrepreneur might decide to resort to such a kind of decision structure either because of her information asymmetry or because of lack of skills.
Mario S. Catalani, Giuseppe F. Clerico

Chapter IV. Leadership and Dependence

Abstract
The problem we are going to deal with is that of the decision that has to be made by a group of persons (e.g. the members of a board or of a committee, the jury in criminal trials). Typically the decision is of a dichotomous type such as whether to accept or reject a project or to absolve or convict a defendant. There is a good deal of literature on the different facets of this problem. Here, more than usual, it is very important to clarify the assumptions made in our analysis. A strong hypothesis is that of the independence of the members, which means that members do not influence one another. A second hypothesis concerns the problem of modelling individual skills. We follow the approach according to which skills may be represented by two numbers, the probabilities of Type I error and of Type II error, or, simply by one number which expresses the probability to make the correct decision.
Mario S. Catalani, Giuseppe F. Clerico

Chapter V. The Decision Making Process of Political Organizations

Abstract
In this chapter we are going to analyse the decision making process of political organizations, exploiting the pioneering ideas of Sah and Stiglitz.
Mario S. Catalani, Giuseppe F. Clerico

Pyramid Decision Structures

Frontmatter

Chapter I. Pyramidal Structures: A Preliminary Note

Abstract
We start with the consideration that human decisions are fallible. Let us consider an entrepreneur (if you prefer an owner, a dictator, etc.) who because of his information asymmetry or because of his lack of skills must rely on his collaborators in order to make a decision. To be more specific let the decision consist in accepting or rejecting a project drawn from a project portfolio. Within the portfolio there is a proportion π of good projects. Accepting a good project entails a benefit, while accepting a bad one entails a loss. The entrepreneur has N collaborators, each of whom is identical and independent in the decision making process. Each collaborator has a probability p1 to accept a good project and a probability p2 to accept a bad one: hence (1 — p1) is the probability of an error of the first type, and p2 is the probability of an error of the second type.
Mario S. Catalani, Giuseppe F. Clerico

Chapter II. Other Properties of Pyramids

Abstract
In the previous chapter we defined a decision structure, called a pyramid decision structure, which is composed of a series of levels consisting of a number of elements not greater than that of the level immediately below. If the decision to be made is of a dichotomous type, for example whether to accept or to reject a project, then each level behaves as a polyarchy, that is the level accepts the project if at least one of its members accepts it. Furthermore the levels as a whole act as a hierarchy, that is the whole structure accepts the project if all the levels accept it. As a matter of convention, let the bottom level be that with the most elements and the top level that with the fewest. Given N, the total number of components of the structure, and k, the number of levels, we have different possible configurations of the pyramid, depending on the distribution of the members across levels. We introduced aquasi-lexicographic ordering of configurations which was considered a sort of law of evolution from an originary configuration. The originary configuration is characterised as containing just one element, per level, with the exception of the bottom level. The ”law of evolution” can thus be stated in the following way: from each configuration the next one is obtained through a movement of one unit from the bottom level to that immediately above, if it is possible to do so and to maintain a pyramid configuration.
Mario S. Catalani, Giuseppe F. Clerico

Chapter III. Pyramids and Dependence

Abstract
In Chapters I and II of Part II the pyramid decision structure was analyzed and defined as having the following characteristics. The structure is composed of a series of levels each composed of a number of members not greater than that of the level immediately below. If the decision to be made is of a dichotomous type, for example accepting or rejecting a project, then each level behaves as a polyarchy, that is each level accepts the project if at least one of its members accepts it. Taken together, the levels act as a hierarchy, that is, the whole structure accepts a project if all the levels accept it. Each member shares the same probability p to make the right decision, and acts independently from all the other members.
Mario S. Catalani, Giuseppe F. Clerico

Chapter IV. Organization, Loyalty and Efficiency

Abstract
The problem of the coordination of the choices and behavior of different economic agents is one of the most crucial in economic analysis. This problem arises both within the market and within organizations. Within the market, price coordinates the free choices of the agents. The variation of the price permits the consistency of the independent choices of the economic agents. In particular, following Hayek (1945), the price vector represents the information tool which allows the market to reach equilibrium. Therefore, information is a product of the market rather than a premise of the exchange. On the contrary, according to Stiglitz (1987), the price mechanism does not necessarily bring the economic system towards equilibrium when the quality of the product rests on price. An analogous need for coordination also arises within bureaucratic organizations born to overcome the shortcomings of the market. Following the ”new institutional economics” approach, the organization arises as an instrument to reduce the excess of the transaction costs and to control individual opportxmism present within the market due to asymmetric information and uncertainty (Coase, 1937; Williamson, 1975, 1985).
Mario S. Catalani, Giuseppe F. Clerico

Conclusions

Abstract
The quality of human decisions and, consequently, the quality of the decisions made by organizations, rests substantially on the following elements: the presence of uncertainty, the existence of asymmetric information, the skills of the decisors, the time necessary to reach a decision and the level of identification of the decisors with the goal pursued by the organization. In fact, these elements can be considered inputs for the production of the output represented by the decision. The quality of the decision (that is, its correctness) can therefore be improved by increasing the quality of the inputs. For example, the availability of greater and better information contributes, coeteris paribus, to the improved quality of the decision. However, increasing the quality and the quantity of inputs incurs additional costs. Thus, a decisor with better skills has a greater probability to choose correctly, coeteris paribus, but entails a larger salary. Each decision to be made implies a trade-off between the increment of the quality of the inputs and the increased cost incurred to finance the growth of quality. Due to this cost and to the scarcity of available resources, human decisions are necessarily subject to errors.
Mario S. Catalani, Giuseppe F. Clerico

Backmatter

Weitere Informationen