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Market Structure and Organizational Form
Author(s) -
Zhou Haiwen
Publication year - 2005
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2005.tb00671.x
Subject(s) - externality , ignorance , organizational structure , unitary state , microeconomics , context (archaeology) , business , market structure , economics , industrial organization , management , paleontology , philosophy , epistemology , political science , law , biology
This article studies the determinants of a firm's organizational form in the context of an imperfectly competitive industry. There are two kinds of organizational forms: the multidivisional form (M‐form) and the unitary form (U‐form). An M‐form firm suffers from ignorance of demand externalities among different products and double marginalization is eliminated. In contrast, in a U‐form firm, demand externalities are taken into consideration and double marginalization exists. A firm's optimal choice of organizational form depends on the market structure.