On the (Sub)optimality of Multi-tier Hierarchies: Coordination versus Motivation

This paper studies internal organization of a firm using an incomplete contracting approach a la Grossman-Hart-Moore and Aghion-Tirole. The two key ingredients of our model are externalities among tasks that require coordination, and investment in task-specific human capital. We compare three types of organizational structures: centralization where the decision authority for all tasks is given to the party without task-specific human capital, decentralization where the decision authority for each task is given to the party with necessary human capital, and hierarchical delegation where the decision authority is allocated in a hierarchical fashion. Centralization is optimal when externalities and the requisite coordination are the main issue in organization design. Decentralization is optimal if the investment in human capital is more important. Hierarchical delegation is optimal in the intermediate case. We also discuss the optimal pattern of hierarchical delegation as well as several directions extending the basic model.Delegation; Incomplete Contracts; Hierarchy

ON THE (SUB) OPTIMALITY OF MULTI-TIER HIERARCHIES: COORDINATION VERSUS MOTIVATION

This paper studies internal organization of a firm using an incomplete contracting approach `a la Grossman-Hart-Moore and Aghion-Tirole. The two key ingredients of our model are externalities among tasks that require coordination, and investment in task-specific human capital. We compare three types of organizational structures: centralization where the decision authority for all tasks is given to the party without task-specific human capital, decentralization where the decision authority for each task is given to the party with necessary human capital, and hierarchical delegation where the decision authority is allocated in a hierarchical fashion. Centralization is optimal when externalities and the requisite coordination are the main issue in organization design. Decentralization is optimal if the investment in human capital is more important. Hierarchical delegation is optimal in the intermediate case. We also discuss the optimal pattern of hierarchical delegation as well as several directions extending the basic model.Delegation, Incomplete Contracts, Hierarchy

Holdup, Search and Inefficiency

This paper investigates the holdup problem in the dynamic search market where buyers and sellers search for their trading partners and specific investments are made after match but before trade. We show that frictionless (competitive) market imposes severe limitations on attainable efficiencies: Markets with small friction make the holdup problem more serious than those with large friction because in any equilibrium, whether stationary or non-stationary, investment must be dropped down to the minimum level and trade must be delayed with positive probability.Delay of Trade, Holdup Problem, Search

Raising Wages to Deter Entry under Unionization

This paper investigates the strategic effects of new entry into product markets in a unionized oligopoly where entry and wage negotiations are sequential. When both a domestic incumbent and a foreign entrant hire unionized workers, the incumbent has incentives to raise the wage, because a higher wage strengthens the bargaining position of the union relative to the entrant at subsequent negotiations when entry occurs. Such a high wage offer may then discourage the potential entrant to enter the market. We also extend the model to allow the foreign entrant to supply the good to the domestic market either by foreign direct investment (FDI) or exports. Under FDI the entrant must negotiate with the domestic union over wages, while under exports it needs not. We show that surprisingly the incumbent can obtain higher profits when the entrant has both options of FDI and export than when it has only the former option.Foreign Direct Investment, Unionized Oligopoly, Wage Contracts, Entry Deterrence

Relationships and Growth

* Revised： [11-31, 2011

Gait Coordination of Hexapod Walking Robots Using Mutual-Coupled Immune Networks

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