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Organizational design with a budget constraint

Author

Listed:
  • Hans Gersbach

    (Alfred Weber-Institut, UniversitÄt Heidelberg, Grabengasse 14, D-69117 Heidelberg, Germany)

  • Uwe Wehrspohn

    (Alfred Weber-Institut, UniversitÄt Heidelberg, Grabengasse 14, D-69117 Heidelberg, Germany)

Abstract

In this paper we point out that the presence of the budget constraint substantially affects the relative performance of organizational decision rules. For instance, if there are only two types of projects to decide upon, the hierarchy always performs better than the polyarchy. The same result holds for any distribution of the quality of projects. We also illustrate that optimal mechanisms for variable evaluation costs involve stopping rules which look hierarchical, but avoid costly duplication as in hierarchies or polyarchies.

Suggested Citation

  • Hans Gersbach & Uwe Wehrspohn, 1998. "Organizational design with a budget constraint," Review of Economic Design, Springer;Society for Economic Design, vol. 3(2), pages 149-157.
    • Handle: RePEc:spr:reecde:v:3:y:1998:i:2:p:149-157
    Note: Received: 5 November 1995 / Accepted: 18 September 1997
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    Citations

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    Cited by:

    1. Peter-J. Jost & Frauke Lammers, 2009. "The organization of project evaluation under competition," Review of Managerial Science, Springer, vol. 3(2), pages 141-155, July.
    2. Peter-J. Jost & Frauke Lammers, 2010. "Organization of Project Evaluation and Implementation under Moral Hazard," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 212-238, June.
    3. Stephen J. DeCanio & Catherine Dibble & Keyvan Amir-Atefi, 2000. "The Importance of Organizational Structure for the Adoption of Innovations," Management Science, INFORMS, vol. 46(10), pages 1285-1299, October.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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