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The hierarchical structure of a firm: a geometric approach

Author

Listed:
  • Kam Ki Tang

    (School of Economics, University of Queensland)

  • Rodney Beard

    (ngevie@yahoo.com)

  • Evelyn Ng

    (School of Economics, University of Queensland)

  • Leopoldo Yanes

    (School of Economics, University of Queensland)

Abstract

This paper develops a novel, geometric approach to modelling a firm's hierarchical structure. We model the firm''s hierarchy as the sector of a circle, in which the radius represents the height of the hierarchy and the angle of the sector represents the width of the hierarchy. The firm then chooses the height and angle in order to maximise profit. We analyse the impacts of changes in economies of scale, input substitutability and labour productivity on the firm''s hierarchical structure. We find that the firm will unambiguously become more hierarchical as specialisation of its workers increases or as its output price increases. The effect of changes in scale economies is contingent on the level of task specialisation and output price.

Suggested Citation

  • Kam Ki Tang & Rodney Beard & Evelyn Ng & Leopoldo Yanes, 2005. "The hierarchical structure of a firm: a geometric approach," Economics Bulletin, AccessEcon, vol. 12(13), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-05l00004
    as

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    File URL: http://www.accessecon.com/pubs/EB/2005/Volume12/EB-05L00004A.pdf
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    References listed on IDEAS

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    Cited by:

    1. Luis Otávio Façanha & Marcelo Resende, 2006. "Hierarchical Structure in Brazilian Industrial Firms: an Econometric Study," Economics Working Papers ECO2006/1, European University Institute.

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    JEL classification:

    • L0 - Industrial Organization - - General

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