Abstract:
We minimize a multi-output quadratic cost function by choosing optimal delegation of authority (DoA). DoA means distribution of management actions needed for a production subsystem between managers with complicated duplication of each others’ efforts. Formally this problem is equivalent to optimization of a production volume distribution between firms with complicated exchange of products and multi-output cost functions. We prove analytical results and use them to develop and test an efficient algorithm, which solves the optimal delegation problem with a small number of iterations.
Keywords:optimal delegation of authority, multi-output cost functions.
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