Several classes of models of hierarchical organizations share two common properties: the characteristics at different levels of the hierarchy are complementary, but this complementarity does not extend beyond adjacent levels. We propose a unified yet simple approach to study comparative statics of organizational characteristics with endogenous number of hierarchical layers in all these models. We use this new approach to study organizational decision making, and show that increased delay cost incentivizes the organization to empower lower level employees more than upper level employees.
Chen, Cheng, and Wing Suen.
"The Comparative Statics of Optimal Hierarchies."
American Economic Journal: Microeconomics,
Firm Behavior: Theory
Organizational Behavior; Transaction Costs; Property Rights
Organization of Production
Business Administration: General