We model an organization as a hierarchy of managers erected on top of a technology (here consisting of a collection of plants). In our framework, the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him. We argue that different organizational forms give rise to different information about managers' performance and therefore differ according to how effective incentives can be in encouraging a good performance. In particular, we show that, under certain assumptions, the M-form (multi-divisional form) is likely to provide better incentives than the U-form (unitary form) because it promotes yardstick competition (i.e. relative performance evaluation) more effectively. We conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for Chinese data.

The revenue-equivalence theorem 1 for auctions predicts that expected seller revenue is independent of the bidding rules, as long as equilibrium has the properties that the buyer with the highest reservation price wins and any buyer with the lowest possible reservation price has zero expected surplus. Thus, in particular, the two most common auction institutions- the open "English " auction and the sealed high-bid auction- are equivalent despite their rather different strategic properties. This strong prediction of equivalence seems at odds, however, with the empirical observation that rarely is any given kind of commodity sold through more than one sort of auction. Thus, for example, art is nearly always auctioned off according to the English rules, whereas job contracts are normally awarded through sealed bids. Admittedly, in the public sector, there have been a few attempts to use both methods (lumber contracts in the Pacific Northwest) or to switch from one to the other (Treasury Bills). But changes have typically met great resistance. This is also in conflict with theory, since a corollary of the revenue equivalence theorem is that the expected surplus for any buyer is the same in the two auctions.

Eric Maskin, John Riley; Equilibrium in Sealed High Bid Auctions, The Review of Economic Studies, Volume 67, Issue 3, 1 July 2000, Pages 439–454, https://d