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A computational theory of the firm

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  • Barr, Jason
  • Saraceno, Francesco

Abstract

This paper proposes using computational learning theory (CLT) as a framework for analyzing the information processing behavior of firms; we argue that firms can be viewed as learning algorithms. The costs and benefits of processing information are linked to the structure of the firm and its relationship with the environment. We model the firm as a type of artificial neural network (ANN). By a simulation experiment, we show which types of networks maximize the net return to computation given different environments.
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Suggested Citation

  • Barr, Jason & Saraceno, Francesco, 2002. "A computational theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 345-361, November.
    • Handle: RePEc:eee:jeborg:v:49:y:2002:i:3:p:345-361
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    1. Cho, In-Koo, 1994. "Bounded Rationality, Neural Network and Folk Theorem in Repeated Games with Discounting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(6), pages 935-957, October.
    2. Jovanovic, Boyan & Nyarko, Yaw, 1996. "Learning by Doing and the Choice of Technology," Econometrica, Econometric Society, vol. 64(6), pages 1299-1310, November.
    3. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 809-839.
    4. Arrow, Kenneth J, 1985. "Informational Structure of the Firm," American Economic Review, American Economic Association, vol. 75(2), pages 303-307, May.
    5. Stephen J. DeCanio & Catherine Dibble & Keyvan Amir-Atefi, 2000. "The Importance of Organizational Structure for the Adoption of Innovations," Management Science, INFORMS, vol. 46(10), pages 1285-1299, October.
    6. DeCanio, Stephen J. & Watkins, William E., 1998. "Information processing and organizational structure," Journal of Economic Behavior & Organization, Elsevier, vol. 36(3), pages 275-294, August.
    7. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-1146, September.
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    Cited by:

    1. Chang, Myong-Hun & Harrington, Joseph Jr., 2006. "Agent-Based Models of Organizations," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 26, pages 1273-1337, Elsevier.
    2. Ying Fan & Menghui Li & Zengru Di, 2004. "Increasing Returns to Scale, Dynamics of Industrial Structure and Size Distribution of Firms," Papers cond-mat/0407383, arXiv.org.
    3. Francesco Saraceno & Jason Barr, 2008. "Cournot competition and endogenous firm size," Journal of Evolutionary Economics, Springer, vol. 18(5), pages 615-638, October.
    4. Barr, Jason & Saraceno, Francesco, 2009. "Organization, learning and cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 39-53, May.
    5. Ricardo Colomo-Palacios & Israel González-Carrasco & Jose Luis López-Cuadrado & Antonio Trigo & Joao Eduardo Varajao, 2014. "I-Competere: Using applied intelligence in search of competency gaps in software project managers," Information Systems Frontiers, Springer, vol. 16(4), pages 607-625, September.
    6. Jason Barr & Nobuyuki Hanaki, 2008. "Organizations undertaking complex projects in uncertain environments," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 3(2), pages 119-135, December.
    7. Nobuyuki Hanaki & Jason Barr, 2005. "Firm Structure, Search and Environmental Complexity," Computing in Economics and Finance 2005 222, Society for Computational Economics.
    8. repec:spo:wpmain:info:hdl:2441/9832 is not listed on IDEAS
    9. Francesco Saraceno & Jason Barr, 2008. "Cournot competition and endogenous firm size," Journal of Evolutionary Economics, Springer, vol. 18(5), pages 615-638, October.
    10. Fioretti, Guido, 2006. "Recognising investment opportunities at the onset of recoveries," Research in Economics, Elsevier, vol. 60(2), pages 69-84, June.
    11. Nobuyuki Hanaki & Jason Barr, 2005. "Firm Structure, Search and Environmental Complexity," Computing in Economics and Finance 2005 222, Society for Computational Economics.
    12. repec:spo:wpecon:info:hdl:2441/9832 is not listed on IDEAS
    13. repec:hal:spmain:info:hdl:2441/9832 is not listed on IDEAS
    14. repec:hal:spmain:info:hdl:2441/6782 is not listed on IDEAS
    15. repec:hal:wpspec:info:hdl:2441/9832 is not listed on IDEAS
    16. repec:spo:wpecon:info:hdl:2441/6782 is not listed on IDEAS
    17. Barr, Jason & Saraceno, Francesco, 2005. "Cournot competition, organization and learning," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 277-295, January.
    18. Marco Corsino & Roberto Gabriele & Enrico Zaninotto, 2009. "How Do Organizational Capabilities Shape Industry Dynamics ?," LEM Papers Series 2009/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    19. repec:hal:wpspec:info:hdl:2441/6782 is not listed on IDEAS
    20. repec:spo:wpmain:info:hdl:2441/6782 is not listed on IDEAS
    21. Rand, William & Rust, Roland T., 2011. "Agent-based modeling in marketing: Guidelines for rigor," International Journal of Research in Marketing, Elsevier, vol. 28(3), pages 181-193.
    22. Michael I.C. Nwogugu, 2019. "Complex Systems, Multi-Sided Incentives and Risk Perception in Companies," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-44704-3, March.

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