Designing division of labor with strategic uncertainty within organizations: Model analysis and a behavioral experiment

Yoshio Kamijo, Daisuke Nakama*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


For managers who are responsible for designing the division of labor, there are prototypes such as the divisional and functional designs, but insufficient knowledge of what to consider when selecting them. To address this shortfall, we developed a multiple economic game model with a two-step structure to examine the strategic interdependence between the two prototypes. We analyzed the model from three different perspectives: a traditional analysis, an equilibrium analysis, and a behavioral analysis followed by a laboratory experiment. While the first analysis revealed that the functional design would outperform divisional design when individual decisions are exogenous, the game theoretic equilibrium analysis demonstrated that the two prototype designs have similar equilibria when individuals are rational. However, assuming that individuals made autonomous decisions with accessible information under given organizational structures, behavioral analysis derived predictions that the divisional design was more likely to produce favorable consequences than the functional design. This prediction was confirmed by the economic experiment in the laboratory. These results imply that the strategic uncertainty within organizations differs according to the designs and affects organizational consequences.

Original languageEnglish
Pages (from-to)257-272
Number of pages16
JournalJournal of Economics and Management Strategy
Issue number2
Publication statusPublished - 2023 Apr 1

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation


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