Raaj Kumar Sah

The Architecture of Economic Systems: Hierarchies and Polyarchies

This paper presents some new perspectives on the structure and performance of alternative economic organizations. We posit that decision makers make errors of judgement (for example, they sometimes select bad projects while rejecting good projects), and that how these errors are aggregated within different organizations depends on their architecture (for example, on how individuals are organized together). Using this framework, we compare the performances of two polar forms of organizations: hierarchies and polyarchies. Assuming judgmental abilities of individuals are similar in the two systems, we show that polyarchies accept a larger proportion of bad projects (compared to hierarchies) whereas hierarchies reject a larger proportion of good projects. We then determine the conditions under which polyarchies have higher or lower expected profit. The conditions under which polyarchies perform better appear to be more plausible and, moreover, this conclusion holds also in the case where the rules for accepting or rejecting projects are rationally determined based on the information available to individuals. The architecture of organizations also affects their portfolio of available projects; we determine conditions under which polyarchies have better or worse portfolios compared to those available to hierarchies.There are many possible extensions of our approach. Among them are the analysis of internal structure of firms, selection of managers (by other managers) and the reproduction and self-perpetuation of organizations over time.

The Quality of Managers in Centralized Versus Decentralized Organizations

This paper examines the dynamic consequences of a greater centralization or decentralization of the decision-making authority to appoint successor managers on the quality of managers actually appointed. Our main result is that a greater centralization results in a greater variability over time in the quality of managers. An intuitive reason for this is that though a highly capable manager may have large beneficial effects on the managerial choices within a centralized system, because this manager has greater authority in such a system, a highly incapable manager placed in the same position has correspondingly large deleterious effects.

Mood fluctuations, projection bias, and volatility of equity prices

This paper focuses on the potential e2ects of small

Price Scissors and the Structure of the Economy

uctuations in investors’ subjective preferences (speci5cally, their discount factors and attitudes towards risk) on the volatility of equity prices. We brie

The Social Cost of Labor and Project Evaluation: A General Approach

y summarize some of the arguments and evidence regarding the

Qualitative properties of profit-making k-out-of-n systems subject to two kinds of failures

uctuations in subjective preferences. Our analysis indicates that such

An Explicit Closed-Form Formula for Profit-Maximizing k-Out-Of-n Systems Subject to Two Kinds of Failures

uctuations may have signi5cant implications for understanding the volatility of the prices of 5nancial assets. We derive a closed-form expression for equilibrium equity prices, and use this expression to map the

Some Empirical Regularities in Market Shares

uctuations in investors’ subjective preferences to the

Distributional Consequences of Rural Food Levy and Subsidized Urban Rations

uctuations in equity prices. Our analysis suggests that small

Technological Learning, Social Learning and Technological Change

uctuations in the discount factor have potentially large e2ects on the latter. For example, if the standard deviation of the