Coordination and the Structure of Firms

Stanley Reiter

No 1121, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: This paper presents a model in which organizational structure emerges as the solution of an optimization problem. The objective is to compute the desired decisions in a given class of economic environments, and the constraints express limitation on the abilities of agents to compute and communicate. The "variable" to be solved for, whose values are interpreted as different organizational structures, is a type of directed graph (an EADAG). Depending on its structure, a solution graph may represent organization into one or more informationally independent units. The structure of solution graphs is derived from the nature of the coordination problem as expressed by the desired decision function.

Date: 1995-05
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