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Technological Choice under Organizational Diseconomies of Scale

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  • Dominique Demougin
  • Anja Schöttner

Abstract

With adverse selection, diseconomies of scale associated with hierarchies may induce the implementation of a second-best technology. This occurs whenever rents to lower tiers of the hierarchy increase faster than total surplus. This is more likely with longer hierarchies.

Suggested Citation

  • Dominique Demougin & Anja Schöttner, 2006. "Technological Choice under Organizational Diseconomies of Scale," SFB 649 Discussion Papers SFB649DP2006-028, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2006-028
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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2006-028.pdf
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    References listed on IDEAS

    as
    1. 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 943-952, October.
    2. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    3. Faure-Grimaud, Antoine & Martimort, David, 2001. "On some agency costs of intermediated contracting," Economics Letters, Elsevier, vol. 71(1), pages 75-82, April.
    4. R. Preston McAfee & John McMillan, 1995. "Organizational Diseconomies of scale," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 399-426, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Adverse Selection; Hierarchies; Technology;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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