We model a firm in an institutional market setting, consisting of a production technology and its governance. The governance consists of a hierarchical firm structure, a cost efficiency parameter,and an internal pay system. The depth of the firm is determined by profit maximization under the...

A hierarchically structured rent-seeking contest may be associated with lower equilibrium expenditure than a corresponding flat contest. In this chapter we discuss how this fact may be used to explain the structure of organizations such as firms, including why firms commonly have outside owners.

Leaders play crucial roles in their enterprises. Most modern organizations today, such as corporations and government departments, have no leaders. About 80% of all organizations have no top structures, and are run by inertia as leaderless organizations. These organizations have pretense-pseudo...