Centralization Versus Decentralization as a Risk-Return Trade-Off
Author | : Alessandra Arcuri |
Publisher | : |
Total Pages | : 0 |
Release | : 2011 |
ISBN-10 | : OCLC:1376652155 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Centralization Versus Decentralization as a Risk-Return Trade-Off written by Alessandra Arcuri and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper characterizes the choice between centralization and decentralization as a risk-return trade-off and examines it in a model that integrates ideas from committee-decisionmaking and portfolio theories. Centralization, by pooling expertise, rarely yields erroneous decisions; however, when it fails, the consequences are global. In contrast, in a decentralized system, erroneous decisions are more frequent but their consequences are locally confined. We assess the relative desirability of (de-)centralization in various scenarios with independent versus interdependent risks. We further discuss the robustness of the model and the relevance of our results for policymaking.