Abstract:
We minimize a cost function by choosing an optimal delegation of authority (DoA). DoA means distribution of management actions needed for a production subsystem between managers with complicated duplication of each others’ efforts. Formally this problem is equivalent to optimization of production volume distribution between firms with complicated exchange of products and multi-output cost functions. We have proved general properties of optimal solution which allow finding out optimal DoA for several classes of cost function. Key properties of managers’ cost functions hold true for a cost function of a whole management subsystem with optimal DoA.
Keywords:optimal delegation of authority, manager, cost, firm.
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