Working Paper: CEPR ID: DP4276
Authors: Timothy Van Zandt
Abstract: We take the hierarchical resource allocation model in Van Zandt (2003a) and derive a simpler, reduced-form model of balanced hierarchies. This model uses continuous approximations; we derive bounds on the errors due to these approximations. We then give results that indicate that optimal hierarchies in the general model of are approximately balanced. In particular, we show that aggregation should be balanced if the hierarchical structure is balanced, and we show the hierarchical structure should be balanced if aggregation is balanced.
Keywords: bounded rationality; decentralization; hierarchies; realtime computation; resource allocation
JEL Codes: D23; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hierarchical structure is balanced (L22) | Optimal aggregation is balanced (C43) |
| Optimal aggregation is balanced (C43) | Hierarchical structure is balanced (L22) |
| Structure of hierarchies (L22) | Aggregation processes (C43) |