On the Design of Hierarchies: Coordination versus Specialization

Oliver D. Hart and John Moore

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: We consider an economy that has to decide how assets are to be used. Agents have ideas, but these ideas conflict. We suppose that decision-making authority is determined by hierarchy. Specifically, each asset has a chain of command, and the most senior person in the chain exercises authority. If a senior person does not need access, he defers to junior person. We analyze the optimal hierarchical structure given that different agents have different tasks: some agents coordinate and others specialize. Our theory throws light on the optimal degree of decentralization inside a firm and on firm boundaries.

Date: 2004-03

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Related works:
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (1999)
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (1999)
Working Paper: On the Design of Hierarchies: Coordination Versus Specialization (1999)
Journal Article: On the Design of Hierarchies: Coordination versus Specialization (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:edn:esedps:117

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