Behavioral Externalities in Decentralized Organizations

Abstract

A number of analytic formulations of resource allocation activities in decentralized organizations have considered the effects of economic or technological externalities but most treatments have neglected concomitant organizational or behavioral effects. This paper introduces the concept of a behavioral externality and relates it to the decision-making process in decentralized organizations. Alternative analytic formulations of behavioral externalities are examined, and a numerical example is presented.