Timothy Van Zandt
Professor of Economics
This paper examines recent research on bounded rationality in organizations which features (i) the explicit modelling of the computation constraints of individual agents and (ii) the endogenous determination of the number of information processing agents. This literature attempts to explain the existence and activities of the administrative apparatus of large organizations and the benefits and costs of decentralization. It has also addressed the questions of how information-processing constraints affect the structure and returns to scale of organizations.