Advertisement

Review of Economic Design

, Volume 14, Issue 1–2, pp 75–93 | Cite as

Optimal information transmission in organizations: search and congestion

  • Àlex Arenas
  • Antonio Cabrales
  • Leon Danon
  • Albert Díaz-Guilera
  • Roger Guimerà
  • Fernando Vega-Redondo
Original Paper

Abstract

We propose a stylized model of a problem-solving organization whose internal communication structure is given by a fixed network. Problems arrive randomly anywhere in this network and must find their way to their respective specialized solvers by relying on local information alone. The organization handles multiple problems simultaneously. For this reason, the process may be subject to congestion. We provide a characterization of the threshold of collapse of the network and of the stock of floating problems (or average delay) that prevails below that threshold. We build upon this characterization to address a design problem: the determination of what kind of network architecture optimizes performance for any given problem arrival rate. We conclude that, for low arrival rates, the optimal network is very polarized (i.e. star-like or centralized), whereas it is largely homogenous (or decentralized) for high arrival rates. These observations are in line with a common transformation experienced by information-intensive organizations as their work flow has risen in recent years.

Keywords

Networks Organizations Design Search Congestion 

JEL Classification

D23 D83 L22 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Albert R, Barabási AL (2002) Statistical mechanics of complex networks. Rev Mod Phys 74: 47–97CrossRefGoogle Scholar
  2. Allen O (1990) Probability, statistics and queueing theory with computer science application. Academic Press, New YorkGoogle Scholar
  3. Arenas A, Díaz-Guilera A, Guimerá R (2001) Communication in networks with hierarchical branching. Phys Rev Lett 86: 3196–3199CrossRefGoogle Scholar
  4. Beggs AW (2001) Queues and hierarchies. Rev Econ Stud 68: 297–322CrossRefGoogle Scholar
  5. Bentley J (2000) Programming pearls. Addison–Wesley, BostonGoogle Scholar
  6. Bolton P, Dewatripont M (1994) The firm as a communication network. Q J Econ 109: 809–839CrossRefGoogle Scholar
  7. Byrne JA (1993) The horizontal corporation. Business Week, December 20: 76–81Google Scholar
  8. Davenport TH (1993) Process innovation: reengineering work through information technology. Harvard Business School Press, CambridgeGoogle Scholar
  9. Dodds PS, Watts DJ, Sabel CF (2003) Information exchange and the robustness of organizational networks. Proc Natl Acad Sci 100: 12516–12521CrossRefGoogle Scholar
  10. Freeman LC (1977) A set of measures of centrality based on betweenness. Sociometry 40: 35–41CrossRefGoogle Scholar
  11. Garicano L (2000) Hierarchies and the organization of knowledge in production. J Polit Econ 108: 874–904CrossRefGoogle Scholar
  12. Guimerà R, Díaz-Guilera A, Vega-Redondo F, Cabrales A, (2002) Optimal network topologies for local search with congestion. Phys Rev Lett 89(24): 248701CrossRefGoogle Scholar
  13. Hammer M (1990) Reengineer work: don’t automate, obliterate. Harv Bus Rev 90: 104–112Google Scholar
  14. Hayek FA (1940) Socialist calculation: the competitive solution. Economica 7: 125–149CrossRefGoogle Scholar
  15. Hurwicz L (1960) Optimality and informational efficiency in resource allocation processes. In: Arrow KJ, Hurwicz L(eds) Mathematical models in the social sciences. Cambridge University Press, CambridgeGoogle Scholar
  16. Kleinberg J (1999) The small world phenomenon: an algorithmic perspective. Cornell Computer Science Technical Report 99-1776Google Scholar
  17. Kleinberg J (2000) Navigation in a small-world. Nature 406: 845CrossRefGoogle Scholar
  18. Krackhardt D, Hanson JR (1993) Informal networks: the company. Harv Bus Rev 71: 104–111Google Scholar
  19. Lange O (1936) On the economic theory of socialism: part one. Rev Econ Stud 4: 53–71CrossRefGoogle Scholar
  20. Lange O (1937) On the economic theory of socialism: part two. Rev Econ Stud 4: 123–142CrossRefGoogle Scholar
  21. Little JDC (1961) A proof of the queueing formula: L = λ W. Oper Res 9: 383–387CrossRefGoogle Scholar
  22. Newman MEJ (2001) Scientific Collaboration networks. II. Shortest paths, weighted networks, and centrality. Phys Rev E 64: 016132CrossRefGoogle Scholar
  23. Newman MEJ, Moore C, Watts DJ (2000) Mean-field solution of the small-world network model. Phys Rev Lett 84: 3201–3204CrossRefGoogle Scholar
  24. Ostroff F, Smith D (1992) The horizontal organization. McKinsey Q 1: 148–168Google Scholar
  25. Penna TJP (1995) The travelling salesman problem and Tsallis statistics. Phys Rev E 51: R1–R4CrossRefGoogle Scholar
  26. Radner R (1993) The organization of decentralized information processing 61:1109–1146Google Scholar
  27. Sah RK, Stiglitz JE (1986) The architecture of economic systems: hierarchies and polyarchies. Am Econ Rev 76: 716–727Google Scholar
  28. Stidham S Jr (1974) A last word on L = λ W. Oper Res 22: 417–421CrossRefGoogle Scholar
  29. Tsallis C, Stariolo DA (1994) Optimization by simulated annealing: recent progress. In: Stauffer D(eds) Annual review of computational physics, vol II.. World Scientific, Singapore, p 343Google Scholar
  30. Visser B (2000) Organizational communication structure and performance. J Econ Behav Organ 42: 231–252CrossRefGoogle Scholar
  31. Watts DJ (1999) Small worlds: the dynamics of networks between order and randomness. Princeton University Press, PrincetonGoogle Scholar
  32. Watts DJ, Strogatz SH (1998) Collective dynamics of ‘small-world’ networks. Nature 393: 440–442CrossRefGoogle Scholar
  33. van Zandt T (1999) Decentralized information processing in the theory of organizations. In: Sertel M(eds) Contemporary economic development reviewed The Enterprise and its Environment vol 4. MacMillan, LondonGoogle Scholar
  34. Zandt T (1999b) Real-time decentralized information processing as a model of organizations with boundedly rational agents. Rev Econ Stud 66: 633–658CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  • Àlex Arenas
    • 1
  • Antonio Cabrales
    • 2
  • Leon Danon
    • 3
  • Albert Díaz-Guilera
    • 3
  • Roger Guimerà
    • 4
    • 5
  • Fernando Vega-Redondo
    • 6
    • 7
  1. 1.Departament d’Enginyeria Informàtica i MatemàtiquesUniversitat Rovira i VirgiliTarragonaSpain
  2. 2.Departamento de EconomiaUniversidad Carlos III de MadridGetafeSpain
  3. 3.Departament de Física FonamentalUniversitat de BarcelonaBarcelonaSpain
  4. 4.Department of Chemical and Biological EngineeringNorthwestern UniversityEvanstonUSA
  5. 5.Northwestern Institute on Complex Systems (NICO)Northwestern UniversityEvanstonUSA
  6. 6.Department of EconomicsEuropean University InstituteFlorenceItaly
  7. 7.Instituto Valenciano de Investigaciones EconómicasValenciaItaly

Personalised recommendations