The Stochastic Diffusion Search (SDS) was developed as a solution to the best-fit search problem. Thus, as a special case it is capable of solving the transform invariant pattern recognition problem. SDS is efficient and, although inherently probabilistic, produces very reliable solutions in widely ranging search conditions. However, to date a systematic formal investigation of its properties has not been carried out. This thesis addresses this problem. The thesis reports results pertaining to the global convergence of SDS as well as characterising its time complexity. However, the main emphasis of the work, reports on the resource allocation aspect of the Stochastic Diffusion Search operations. The thesis introduces a novel model of the algorithm, generalising an Ehrenfest Urn Model from statistical physics. This approach makes it possible to obtain a thorough characterisation of the response of the algorithm in terms of the parameters describing the search conditions in case of a unique best-fit pattern in the search space. This model is further generalised in order to account for different search conditions: two solutions in the search space and search for a unique solution in a noisy search space. Also an approximate solution in the case of two alternative solutions is proposed and compared with predictions of the extended Ehrenfest Urn model. The analysis performed enabled a quantitative characterisation of the Stochastic Diffusion Search in terms of exploration and exploitation of the search space. It appeared that SDS is biased towards the latter mode of operation. This novel perspective on the Stochastic Diffusion Search lead to an investigation of extensions of the standard SDS, which would strike a different balance between these two modes of search space processing. Thus, two novel algorithms were derived from the standard Stochastic Diffusion Search, ‘context-free’ and ‘context-sensitive’ SDS, and their properties were analysed with respect to resource allocation. It appeared that they shared some of the desired features of their predecessor but also possessed some properties not present in the classic SDS. The theory developed in the thesis was illustrated throughout with carefully chosen simulations of a best-fit search for a string pattern, a simple but representative domain, enabling careful control of search conditions.