Essays on optimal economic growth

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics and Social Science, 1964.Vita.Includes bibliographical references (leaves 98-99).by David Levhari.Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics and Social Science, 1964

Market Structure, Quality and Durability

This paper analyzes the effects of market structure -- monopoly versus competition -- on the quality and durability of goods. Also, it tries to find the impact of government regulation on these variables. The types of quality improvements discussed are: quality as pure substitute for quantity; quality which increases the demand for the good; and quality improvement which increases the durability of the good. In general, it is impossible to deduce that quality is independent of market structure. It depends on the cost structure. The paper shows that when quality is a substitute for quantity, both quality and quantity of the monopoly might fall short of those in the competitive market. Regulating only quality, or only quantity, may increase the monopoly misallocations of resources. In other types of quality improvements discussed, it may turn out that quality and durability may be better or worse in the monopolized industry than in the competitive one. Regulating only quality may improve the resource allocation but not eliminate the bias. Quantity regulation by itself may be sufficient for producing the optimal flow of services.

The Optimum Span of Control in a Pure Hierarchy

This is a model of a pure hierarchy which oversees a given number of productive units. Its aim is to minimize costs, which are the sum of wage costs and costs caused by delays in decision making. The advantage of the model is that it permits the calculation of an optimum formal structure of the hierarchy in terms of the span of control at different levels. The general result is that spans of control should increase as one goes down the levels of the hierarchy. However, when time savings become more and wage costs less important, the difference between the optimum spans of control shrinks; in the limit, when wage costs are not considered at all, they become equal. These results support the findings of some empirical studies: there is evidence for increasing spans of control in business organizations, while in armies, where cost considerations are secondary, spans of control tend to be more uniform.organizational design, decision making, span of control