The hierarchical structure of the firm: A geometric perspective

Tang, Kam Ki and Yanes, Leopoldo (2009) The hierarchical structure of the firm: A geometric perspective. Prague Economic Papers, 18 2: 156-175.

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Author Tang, Kam Ki
Yanes, Leopoldo
Title The hierarchical structure of the firm: A geometric perspective
Journal name Prague Economic Papers
ISSN 1210-0455
Publication date 2009-03-01
Year available 2009
Sub-type Article (original research)
Volume 18
Issue 2
Start page 156
End page 175
Total pages 10
Editor Doubravova, Libuse
Place of publication Prague, Czechoslovaka
Publisher Vysoka Skola Ekonomicka v Praze
Language eng
Subject 720203 Industrial organisations
140104 Microeconomic Theory
150311 Organisational Behaviour
Abstract This paper incorporates hierarchical structure into the neoclassical theory of the firm. Firms are hierarchical in two respects: the organization of workers in production and the wage structure. The firm's hierarchy is represented as a sector of a circle, where the radius represents the hierarchy's height, the width of the sector represents the breadth of the hierarchy at a given height, and the angle of the sector represents the span of control. A perfectly competitive firm chooses height and width, as well as capital, in order to maximize profit. We analyse the short-run and long-run impact of changes in scale economies, input substitutability, and input and output prices on the firm's hierarchical structure. We find that the firm grows as the specialization of its workers increases or as its output price increases relative to input prices. The effect of changes in scale economies is contingent on the price of output. The model also brings forth an analysis of wage inequality within the firm, which is found to be independent of the firm's hierarchical organization of workers, and only depends on the firm's wage schedule.
Keyword theory of the firm; economies of scale
input substitutability
hierarchical structure
economies of scale
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: 2010 Higher Education Research Data Collection
School of Economics Publications
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Created: Thu, 03 Sep 2009, 17:46:57 EST by Mr Andrew Martlew on behalf of School of Economics