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Separability and AggregationThe Collected Works of W. M. Gorman, Volume I$
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W. M. Gorman, C. Blackorby, and A. F. Shorrocks

Print publication date: 1996

Print ISBN-13: 9780198285212

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198285213.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 22 January 2021

Assembling Efficient Organizations?

Assembling Efficient Organizations?

(p.411) 23 Assembling Efficient Organizations?
Separability and Aggregation

W. M. Gorman (Contributor Webpage)

, C. Blackorby, A. F. Shorrocks
Oxford University Press

This paper appeared in a Festschrift in honour of Kenneth Arrow in 1986 (Uncertainty, Information and Communication Essays in Honor of Kenneth J. Arrow, iii, eds W. P. Heller, R. M. Starr, and D. A. Starrett. Cambridge: Cambridge University Press). The ideas contained in it clearly flow from those in ’More measures for fixed factors’ (Ch. 21), although the techniques used to obtain the results are different. Gorman suggests that managers may buy and sell different firms with an eye towards efficient control within a large enterprise, and that this behaviour leads to an enterprise consisting of many different factories and subsidiaries chosen with this efficiency in mind. The manager of the enterprise wishes to be able to decentralize decision‐making without any loss of efficiency. This paper rationalizes this procedure––a particular type of two‐stage budgeting within profit‐maximizing firms.

Keywords:   decentralization of decision‐making, decision‐making, efficiency, firms, large enterprises, organizations, profit‐maximization, two‐stage budgeting

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