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|Title: ||Real-Time Decentralization Information Processing and Returns to Scale|
|Authors: ||Van Zandt, Timothy|
|Keywords: ||returns to scale|
decentralized information processing
|Issue Date: ||Aug-1999|
|Publisher: ||Stern School of Business, New York University|
|Series/Report no.: ||IS-99-03|
|Abstract: ||We use a model of real-time decentralized information processing to understand how
constraints on human information processing affect the returns to scale of organizations.
We identify three informational (dis)economies of scale: diversification of heterogeneous
risks (positive), sharing of information and of costs (positive), and crowding out of
recent information due to information processing delay (negative). Because decision
rules are endogenous, delay does not inexorably lead to decreasing returns to scale.
However, returns are more likely to be decreasing when computation constraints, rather
than sampling costs, limit the information upon which decisions are conditioned. The
results illustrate how information processing constraints together with the requirement
of informational integration cause a breakdown of the replication arguments that have
been used to establish nondecreasing technological returns to scale.|
|Appears in Collections:||IOMS: Information Systems Working Papers|
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