Optimal sequential decision architectures and the robustness of hierarchies and polyarchies

This paper studies collective decision making in the context of a project selection model. We derive the optimal decision architecture in the presence of marginal decision costs, and investigate the circumstances under which the hierarchy and polyarchy emerge as optimal sequential architectures. Our analysis extends previous results on optimal organizational decision-making to a sequential setting, and further demonstrates the fragility of the hierarchy and polyarchy as optimal architectures.I would like to thank Ruth Ben-Yashar, Thorbjorn Knudsen, Shmuel Nitzan, Raaj Sah and Peter Norman Sorensen for comments on earlier versions of the paper. I have also benefited greatly from the advice and suggestions of two anonymous referees and the Coordinating Editor, Maurice Salles. The results in this paper were presented at the Economic Architecture Conference, 21–22 June 2003, at Odense, Denmark. I would like to thank the University of Southern Denmark and the Danish Social Science Research Council for their hospitality, and the participants at the Workshop for their constructive comments. Research support from the Singapore Management University is also gratefully acknowledged. The usual disclaimer applies here.