Computation and Complexity in Economic Behavior and Organization

This book presents a model of computing and a measure of computational complexity which are intended to facilitate analysis of computations performed by people, machines, or a mixed system of people and machines. The model is designed to apply directly to models of economic theory, which typically involve continuous variables and smooth functions, without requiring analysis of approximations. The model permits analysis of the feasibility and complexity of the calculations required of economic agents in order for them to arrive at their decisions. The treatment contains applications of the model to game theory and economics, including comparison of the complexities of different solution concepts in certain bargaining games, and the trade-off between communication and computation in an example of an Edgeworth Box economy.

People and organizations in economic situations would generally prefer to act effectively in terms of their own goals. But the economic environments in which they must act are often large and complicated, and economic actors have limited abilities to observe and communicate information, and to figure out what to do in light of their goals. This book provides an analytical framework in which these limitations and their effects on behavior and organization can be studied. This treatment is addressed to economists, especially theorists, and graduate students. It may also interest computer scientists and specialists in operations research, or management science, who are interested in organization.