Technological Choice under Organizational Diseconomies of Scale
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.
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"Organizational Diseconomies of Scale,"
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Wiley Blackwell, vol. 4(3), pages 399-426, Fall.
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