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Showing posts with the label decentralized production

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Production Malls!

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To Alfred Chandler, the edifice of the business landscape was centred on the domination of the big. As someone described him, he was hunter of big game and collected trophies in both US and Western Europe. For Chandler, scale and scope characterized the flora and fauna of business, thus a critical role for the volume and diversification. The hunters of the small game, in the backdrop of the above, would find difficult to sustain in the long run. Chandler’s assertions, incontestably, command certain merits. Firms whose cost structured is preponderated towards fixed costs necessitate large volumes for subsistence. Fixed costs apportioned over large volumes pull down average fixed costs creating conditions for economies of scale.   Simultaneously, as the firm gains weight, there would be increasing difficulties in organization management thus generating certain diseconomies of scale. The trade-off that firm is able to execute and balance will define its wherewithal.   Large industr
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