The multidivisional firm is modeled as a system of interconnected nodes that exchange continuous flows of projects of varying urgency and queue waiting tasks. The main innovation over existing models is that the rate at which waiting projects are taken into processing depends positively on both the availability of resources and the size of the queue, capturing a salient quality of human organizations. A transfer pricing scheme for decentralizing the system is presented, and conditions are given to determine which nodes can be operated autonomously. It is shown that a node can be managed separately from the rest of the system when all of the projects flowing through it are equally urgent.
- Transfer pricing
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)