In this paper I present a theory of the boundary of the firm that accounts for some important characteristics of real-world multidivisional firms: Operative decisions are in the hands of middle managers who are rewarded with incentive contracts based on the performance of their units; Managers'...

This paper concentrates on the question of organizational design under asymmetric information. The design of the organization has two parts: first, communication channels between the members should be established and second, the tasks should be allocated to the party that performs it in the most...

This paper explores the internal organization of production in technology firms. We propose that flat hierarchical organizations is the technology-intensive firm's response to the need for worker skill diversification in an environment where skills become obsolete very rapidly. If it is...

The paper considers an infinitely repeated competition between vertical manufacturer-retailer hierarchies. In every period, retailers privately observe the demand, consequently manufacturers pay retailers “information rents”. I compare between several collusive equilibria that differ in the...

We analyze competition through incentive contracts for managers in duopoly. Privately informed managers exert surplus enhancing effort that generates an externality on the rival. Asymmetric information on imperfectly correlated shocks creates a two-way distortion of efforts under strategic...

This study examines how employees internalize differences in social distance between themselves and their managers when they are competing for a reward given by the manager. In an employer/employee relationship, this difference in social distance between the employer and the various employees...