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Institutions and incentives

Research articles · Aug 31, 2017

Coordination in centralized and decentralized systems

Vipin P Veetil

Centre d’economie de la Sorbonne, France

Volume 10(2) Summer 2017

Cite as: V. Veetil; 2017; Coordination in centralized and decentralized systems; International Journal of Microsimulation; 10(2); 86–102. doi: 10.34196/ijm.00157

Abstract

We study a simple coordination problem to understand the difference between centralized and decentralized economic systems. The decentralized system is more robust than the centralized system to communication errors. But the centralized system takes less time than the decentralized system to create coordination among constituent parts. Decentralization is preferable when the constituent parts are more likely to make communication errors, when there is little urgency, and when there is need to prevent system-collapse.

This article contains 5 figures.

Figures

Figure 1. Mean of coordination in the centralized and the decentralized system.
Figure 2. Variance of coordination in the centralized and the decentralized system.
Figure 3. Boxplots of coordination in the centralized and the decentralized system.
Figure 4. Histograms of coordination of the centralized and decentralized systems with different probabilities of error.
Figure 5. Time steps necessary for decentralized system to exceed the mean coordination of the centralized system with ten percent probability of communication error.