Economic Perspectives III

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In the spirit of Hypothesis 3, this topic's simulation identifies and explores some of the tradeoffs between centralized and decentralized decision making in organizations. Hierarchical, centralized organizations tend to be more conservative in their decisions than decentralized ones. We saw how this kind of behavior can be preferable when the environment is relatively unfriendly, and thorough screening is required. We also saw the advantage of decentralized systems in a more trouble-free environment. In a real-life scenario some combination of the two strategies is optimal, and the degree of centralization depends on environmental parameters such as the one considered in this topic.

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