Author： Marschak T. Reichelstein S.
Publisher： Academic Press
ISSN： 0022-0531
Source： Journal of Economic Theory, Vol.79, Iss.1, 1998-03, pp. : 106-141
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Abstract
Our model of network mechanisms studies individually addressed messages between any two members of an organization. For a given organizational objective function, we examine communication costs, as measured by the number of message variables that agents need to exchange at equilibrium in order to achieve the desired action choices. For the class of objective functions we consider, price mechanisms are shown to minimize communication costs. If one requires the network to be hierarchical, the organization may be forced to use more message variables. We identify the increase in communication costs associated with alternative hierarchies.
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