Organizational Design and Technology Choice Under Intrafirm Bargaining

Posted: 19 Feb 2014

See all articles by Lars Stole

Lars Stole

University of Chicago - Booth School of Business

Jeffrey Zwiebel

Stanford Graduate School of Business

Date Written: March 1, 1996

Abstract

We consider a wide number of applications of an intrafirm bargaining game within organizations where employees and the firm engage in wage negotiations. Under our presumption that contracts cannot bind employees to the organization, the resulting stable wage and profit profiles give rise to an objective function for the firm that places weight on inframarginal profits in an economically significant manner. We in turn employ this methodology to explore applications of organizational design, hiring and capital decisions, training and cross-training, the importance of labor and asset specificity, managerial hierarchies, preferences for unionization, responses to competition, and internal capital budgeting.

Keywords: contract theory, incentives

JEL Classification: C70, D23, G31, J30, L20

Suggested Citation

Stole, Lars A. and Zwiebel, Jeffrey H., Organizational Design and Technology Choice Under Intrafirm Bargaining (March 1, 1996). American Economic Review, Vol. 86, No. 1, 1996. Available at SSRN: https://ssrn.com/abstract=2397242

Lars A. Stole (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7309 (Phone)
773-702-0458 (Fax)

Jeffrey H. Zwiebel

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-2917 (Phone)
650-725-7979 (Fax)

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