Economics Research Institute Study Paper
Utah State University Department of Economics
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Single-plant firms choose quantity/quality levels to maximize profits. Multi-plant firms face this decision and must also choose how many decision makers to have. This paper presents two case studies and a model of a multi-plant firm in which overhead costs are lower with one decision-maker (centralization), but the mass of information and the need for timely decisions make occasional mixups unavaoidable. Multiple decision makers (decentralization) solves the mixup problem. Standardization-treating different outlets similarly in response to costly mixups-appears in the case studies, and is demonstrated as a result in the model.
Hunnicutt, Lynn, "Mixups in the Warehouse Centralization and Decentralization in the Multi-Plant Firm" (2000). Economic Research Institute Study Papers. Paper 211.