In: Review
Multi-unit organizations are a form of organizations where the geographically dispersed units provide similar products or services in different markets. Deciding on an appropriate level of centralization in such organizations presents a unique challenge. One the one hand the organizations want to maintain a consistent brand identity in all units through centralized control, but on the other hand, they want to provide the units with sufficient autonomy to respond to the challenges they face locally. Traditionally, this challenge was perceived to require a trade-off between performance and organizational synchrony, with performance demanding more decentralization and synchrony requiring more centralized control. However, our research explores how organizations can potentially resolve this trade-off by promoting norms for knowledge-sharing and setting up the right communication channels, relying on the unit managers’ intrinsic tendency to conform to the behavior of their peers. We build an agent-based model of an organization with multiple interdependent units...
In: International Journal of Organization Theory & Behavior
The paper explores the intersection between modularity and conformity in organizational contexts using agent-based model of organizations as complex systems. The results demonstrate that a concentration of interdependent tasks within fewer departments can boost overall performance. Conformity decreases performance in all organizational structures except for cases when the departments work on highly similar tasks. This decline in performance can also explain why functional organizational structures are still being used in practice even though they are less modular than divisional structures - they feature lower levels of conformity and, thus, face smaller decline. If departments are highly coupled, the performance can surprisingly be improved as complexity within departments increases.
In: Advances in Social Simulation
Multi-unit organizations such as retail chains are interested in the diffusion of best practices throughout all divisions. However, the strict guidelines or incentive schemes may not always be effective in promoting the replication of a practice. In this paper we analyze how the individual belief systems, namely the desire of individuals to conform, may be used to spread knowledge between departments. We develop an agent-based simulation of an organization with different network structures between divisions through which the knowledge is shared, and observe the resulting synchrony. We find that the effect of network structures on the diffusion of knowledge depends on the interdependencies between divisions, and that peer-to-peer exchange of information is more effective in reaching synchrony than unilateral sharing of knowledge from one division. Moreover, we find that centralized network structures lead to lower performance in organizations.
In: Coordination, Organizations, Institutions, Norms, and Ethics for Governance of Multi-Agent Systems XIV
We focus on how individual behavior that complies with social norms interferes with performance-based incentive mechanisms in organizations with multiple distributed decision-making agents. We model social norms to emerge from interactions between agents: agents observe other the agents’ actions and, from these observations, induce what kind of behavior is socially acceptable. By complying with the induced socially accepted behavior, agents experience utility. Also, agents get utility from a pay-for-performance incentive mechanism. Thus, agents pursue two objectives. We place the interaction between social norms and performance-based incentive mechanisms in the complex environment of an organization with distributed decision-makers, in which a set of interdependent tasks is allocated to multiple agents. The results suggest that, unless the sets of assigned tasks are highly correlated, complying with emergent socially accepted behavior is detrimental to the organization’s performance. However, we find that incentive schemes can help offset the performance loss by applying individual-based incentives...
In: Bogazici University Department of Economics Working Papers
In this paper, we perform a welfare comparison of different life-cycle investment strategies for the pension funds using Monte Carlo simulations in an heterogeneous agent framework for Turkey. We calibrate model parameters based on historical data and compare a set of strategies provided by the pension fund industry and suggested by the asset management literature. Our results reveal that heuristic suggested by Cocco (2004) exhibits a better performance compared to other options. We also show that life-cycle investment strategies outperform “fixed over the lifetime” strategies and risk-averse individuals might hedge their risks by investing in housing.
In: Social, Cultural, and Behavioral Modeling
Social norms are rules and standards of expected behavior that emerge in societies as a result of information exchange between agents. This paper studies the effects of emergent social norms on the performance of teams. We use the -framework to build an agent-based model, in which agents work on a set of interdependent tasks and exchange information regarding their past behavior with their peers. Social norms emerge from these interactions. We find that social norms come at a cost for the overall performance, unless tasks assigned to the team members are highly correlated, and the effect is stronger when agents share information regarding more tasks, but is unchanged when agents communicate with more peers. Finally, we find that the established finding that the team-based incentive schemes improve performance for highly complex tasks still holds in presence of social norms.