Osaka Workshop on Economics of Institutions and Organization (#141)

We investigate the organizational design of allocating authorities in a dynamic setting in which, due to the lack of verifiable information, trading parties must rely on relational contracts via long-term relationships. We then show that optimal organization becomes multi-tier hierarchies in which contracting authorities are delegated over agents as a vertical chain of commands, instead of allocating them in the centralized manner, when parties are sufficiently patient. We also discuss several implications about supplier networks in the automotive industry in Japan and the US. Abstract：Ishiguro Shingo