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Optimal Organization

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  • Kouroche Vafaï

    (Université Paris Descartes, Sorbonne Paris Cité)

Abstract

A contract-based model of the endogenous determination of an organization's architecture is considered where a principal has the choice between a two- and a three-level organization. Each organizational architecture is plagued with its own specific form(s) of opportunism. We derive the conditions under which opportunism in a three-level hierarchy becomes so severe as to make this architecture strictly outperformed by a two-level organization.

Suggested Citation

  • Kouroche Vafaï, 2012. "Optimal Organization," Economics Bulletin, AccessEcon, vol. 32(1), pages 518-527.
    • Handle: RePEc:ebl:ecbull:eb-11-00747
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    References listed on IDEAS

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    1. Arup Bose & Debashis Pal & David E. M. Sappington, 2010. "Equal Pay for Unequal Work: Limiting Sabotage in Teams," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(1), pages 25-53, March.
    2. Emilson C. D. Silva & Charles M. Kahn & Xie Zhu, 2007. "Crime and Punishment and Corruption: Who Needs “Untouchables?”," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(1), pages 69-87, February.
    3. Keren, Michael & Levhari, David, 1989. "Decentralization, aggregation, control loss and costs in a hierarchical model of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 11(2), pages 213-236, March.
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    More about this item

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D2 - Microeconomics - - Production and Organizations

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