We study the optimal hierarchical structure of an organization under limited commitment. The organization cannot make a long term commitment to wages and output levels, while it can commit to its hierarchical structure. We show that the optimal hierarchical structure is horizontal when it is...

We study an organization with a top management (principal) and multiple subunits (agents) with private information that determine the organization's aggregate efficiency. Under centralization, eliciting the agents' private information may induce the principal to manipulate aggregate information,...

We study information flows in an organization with a top management (principal) and multiple subunits (agents) with private information that determines the organization's aggregate efficiency. Under centralization, eliciting the agents' private information may induce the principal to manipulate...

In an agency model with adverse selection, we study how hidden interactions between agents affect the optimal contract. The principal employs two agents who learn their task environments through their involvement. The principal cannot observe the task environments. It is important to note that...

We study the optimal hierarchical structure of an organization under limited commitment. The organization cannot make a long term commitment to wages and output levels, while it can commit to its hierarchical structure. We show that the optimal hierarchical structure is horizontal when it is...

We compare rigid and flexible organizations when side-contracting among agents is possible. Within a rigid organization, each agent can produce only one component of the final product, whereas within a flexible organization, the agents can reallocate their tasks during the production period. In...