PARTICIPATORY DECISION-MAKING IN THE FIRM

This paper sets out a model in which the costs of the processes of making and implementing decisions in a firm depend on the fraction of persons who participate in their making, together with the 'similarity' of employee preferences. It is shown, under certain conditions, that for each decision there is an optimal participatory fraction that varies with preference similarities. The nature of the latter variation is explored. In addition, Condorcet's Jury Theorem is used to extend these results to account for decision quality by allowing, in the optimization, for the probability of a 'correct' decision being made.