Efficient structure of organization with heterogeneous workers
AbstractAbstract This paper studies the problem of organizational design in a setting where workers differ in their abilities and every worker has to be monitored to prevent shirking. The need for monitoring workers generates a hierarchical structure in an organization, which can be represented as a rooted tree. The value of an organization is determined by the wage cost, the total number of productive tasks carried out, and the length of the chain of supervision in the organizational hierarchy. In this setting, we construct and characterize an efficient structure of hierarchy which maximizes the value of the organization. In addition, we show that a hierarchy with an optimal size has the form of a balanced rooted tree.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Mathematical Economics.
Volume (Year): 46 (2010)
Issue (Month): 6 (November)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jmateco
Organization Hierarchy Rooted tree Structure rule;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Van Zandt, Timothy, 2004. "Balancedness of Real-Time Hierarchical Resource Allocation," CEPR Discussion Papers 4276, C.E.P.R. Discussion Papers.
- Andrea Patacconi, 2009. "Coordination and delay in hierarchies," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 190-208.
- Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November.
- Meagher, Kieron J., 2003. "Generalizing incentives and loss of control in an optimal hierarchy: the role of information technology," Economics Letters, Elsevier, vol. 78(2), pages 273-280, February.
- Orbay, Hakan, 2002. "Information Processing Hierarchies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 370-407, August.
- Mathias Dewatripont & Patrick Bolton, 2004.
"The firm as a communication network,"
ULB Institutional Repository
2013/9599, ULB -- Universite Libre de Bruxelles.
- Mathias Dewatripont & Patrick Bolton, 1994. "The firm as a communication network," ULB Institutional Repository 2013/9595, ULB -- Universite Libre de Bruxelles.
- Mathias Dewatripont & Patrick Bolton, 1996. "The firm as a communication network," ULB Institutional Repository 2013/9597, ULB -- Universite Libre de Bruxelles.
- Schulte, Elisabeth & Peter Gruner, Hans, 2007.
"Speed and quality of collective decision making: Imperfect information processing,"
Journal of Economic Theory,
Elsevier, vol. 134(1), pages 138-154, May.
- Grüner, Hans Peter & Schulte, Elisabeth, 2004. "Speed and Quality of Collective Decision-Making, I: Imperfect Information Processing," CEPR Discussion Papers 4179, C.E.P.R. Discussion Papers.
- McAfee, R Preston & McMillan, John, 1995.
"Organizational Diseconomies of Scale,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 4(3), pages 399-426, Fall.
- Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-46, September.
- Luis Garicano & Esteban Rossi-Hansberg, 2006.
"Organization and Inequality in a Knowledge Economy,"
The Quarterly Journal of Economics,
MIT Press, vol. 121(4), pages 1383-1435, November.
- Luis Garicano & Esteban Rossi-Hansberg, 2005. "Organization and Inequality in a Knowledge Economy," NBER Working Papers 11458, National Bureau of Economic Research, Inc.
- James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
- Michael Keren & David Levhari, 1979. "The Optimum Span of Control in a Pure Hierarchy," Management Science, INFORMS, vol. 25(11), pages 1162-1172, November.
- Meagher, K., 1998.
"The Impact of Hierarchies on Wages,"
98-16, New South Wales - School of Economics.
- Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75, pages 123.
- Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
- Qian, Yingyi, 1994. "Incentives and Loss of Control in an Optimal Hierarchy," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 527-44, July.
- Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-52, October.
- Beckmann, Martin J., 1977. "Management production functions and the theory of the firm," Journal of Economic Theory, Elsevier, vol. 14(1), pages 1-18, February.
- Mookherjee Dilip & Reichelstein Stefan, 2001. "Incentives and Coordination in Hierarchies," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-38, April.
- Prat, Andrea, 1997. "Hierarchies of Processors with Endogenous Capacity," Journal of Economic Theory, Elsevier, vol. 77(1), pages 214-222, November.
- Alan Beggs, 2000.
"Queues and Hierarchies,"
Economics Series Working Papers
34, University of Oxford, Department of Economics.
- Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 991-1010, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.