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Span of control, transaction costs and the structure of production chains

Author

Listed:
  • Kikuchi, Tomoo

    (Lee Kuan Yew School of Public Policy, National University of Singapore)

  • Nishimura, Kazuo

    (Research Institute of Economics and Business Administration, Kobe University)

  • Stachurski, John

    (Research School of Economics, Australian National University)

Abstract

This paper builds coordination costs, transaction costs and other aspects of the theory of the firm into a production chain model with an infinite number of ex ante identical producers. The equilibrium determines prices, allocations of productive tasks across firms, firm sizes, and the number of active firms. These prices and allocations match several stylized facts on firm boundaries, vertical integration, and division of the value chain.

Suggested Citation

  • Kikuchi, Tomoo & Nishimura, Kazuo & Stachurski, John, 2018. "Span of control, transaction costs and the structure of production chains," Theoretical Economics, Econometric Society, vol. 13(2), May.
    • Handle: RePEc:the:publsh:2376
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fally, Thibault & Hillberry, Russell, 2018. "A Coasian model of international production chains," Journal of International Economics, Elsevier, vol. 114(C), pages 299-315.
    2. Laura Alfaro & Pol Antràs & Davin Chor & Paola Conconi, 2019. "Internalizing Global Value Chains: A Firm-Level Analysis," Journal of Political Economy, University of Chicago Press, vol. 127(2), pages 508-559.
    3. Chor, Davin & Manova, Kalina & Yu, Zhihong, 2021. "Growing like China: Firm performance and global production line position," Journal of International Economics, Elsevier, vol. 130(C).
    4. Yu, Meng & Zhang, Junnan, 2019. "Equilibrium in production chains with multiple upstream partners," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 1-10.
    5. Meng Yu & Junnan Zhang, 2019. "Equilibrium in Production Chains with Multiple Upstream Partners," Papers 1908.08208, arXiv.org.
    6. Hansen, Benjamin & Miller, Keaton & Weber, Caroline, 2022. "Vertical integration and production inefficiency in the presence of a gross receipts tax," Journal of Public Economics, Elsevier, vol. 212(C).
    7. Haiwen Zhou, 2021. "Fixed Costs and the Division of Labor," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 63-81, May.
    8. Karabay, Bilgehan, 2022. "A new dimension in global value chains: Control vs. delegation in input procurement," Journal of International Economics, Elsevier, vol. 137(C).
    9. Antrà s, Pol & Chor, Davin, 2021. "Global Value Chains," CEPR Discussion Papers 15908, C.E.P.R. Discussion Papers.
    10. Kikuchi, Tomoo & Nishimura, Kazuo & Stachurski, John & Zhang, Junnan, 2021. "Coase meets Bellman: Dynamic programming for production networks," Journal of Economic Theory, Elsevier, vol. 196(C).
    11. Antrà s, Pol & Chor, Davin, 2017. "On the Measurement of Upstreamness and Downstreamness in Global Value Chains," CEPR Discussion Papers 12549, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Span of control; firm boundaries; fragmentation; distribution of firms;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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