A mathematical model of the resource allocation decision process in a two level decentralized organization is presented. The model and solution procedure are capable of representing a wide range of behavioral situations. Some important aspects of the model are: (1) It allows for informational autonomy at both levels of the organization. (2) The structure of the organization can affect the final decision. (3) The goal setting behavior of the superordinate and the subordinates explicitly accounts for the decision maker’s “bounded rationality.” (4) The model explicitly allows for both the superordinate and the subordinates to have their own set of goals. (5) A final decision is reached through an iterative information exchange between the superordinate and the subordinates. (6) The solu- tion procedure leads to a resource allocation plan which reflects both the superordinate’s goals and the subordinates’ goals.