publication . Preprint . 1997

Incentives

Eric Maskin; Yingyi Qian; Cheng-Gang Xu;
Open Access
  • Published: 01 Oct 1997
Abstract
We model organization as the command-and-communication network of managers erected on top of technology (which is modeled as a collection of plants). In our framework, the role of a manager is to deal with shocks that affect the plants that he oversees directly or indirectly. Organizational form is then an instrument for (a) economizing on managerial costs, and (b) providing managerial incentives. We show that two particular organizational forms, the M-form (multi-divisional form) and the U-form (unitary form), are the optimal structures when shocks are sufficiently “big”. We argue however that, under certain empirical assumptions, the M-form is likely to be str...
Subjects
free text keywords: jel:R14, jel:J01

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