 The choice of organizational form under intrafirm bargaining rulesFumi Kiyotaki and Toshiji Miyakawa Journal of the Japanese and International Economies, 2012, vol. 26, issue 3, 369-392 Abstract: This paper studies the choice of organizational form under incomplete contracts. We identify an organizational form with a rule of ex-post bargaining and compare four types of organization: horizontal organizations, inverted pyramidal hierarchies, pyramidal hierarchies and vertical hierarchies. We show that if the human capital investments of all members are perfectly complementary, the horizontal organization is chosen. If the investments of two players including the owner are essential, the inverted pyramidal hierarchy can occur. Pyramidal hierarchies minimize the agency cost if investments are non-firm-specific. The vertical hierarchy emerges when the owner can motivate a player who undertakes firm-specific investment by assigning him to the middle tier. We also examine who should be assigned to the middle tier in a vertical hierarchy. Keywords: Organizational form; Firm-specific investment; Incomplete contract; Noncooperative bargaining rule (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:26:y:2012:i:3:p:369-392 DOI: 10.1016/j.jjie.2012.06.002 Access Statistics for this article Journal of the Japanese and International Economies is currently edited by Takeo Hoshi More articles in Journal of the Japanese and International Economies from Elsevier |
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