Optimal Management of Evolving Hierarchies

Jens L. Hougaard, Juan D. Moreno-Ternero, Lars P. Østerdal

Research output: Working paperResearch


We study the optimal management of evolving hierarchies of revenue-generating agents. The initiator invests into expanding the hierarchy by adding another agent, who will bring revenues to the joint venture and who will invest herself into expanding the hierarchy further, and so on. The higher the investments (which are private information), the higher the probability of expanding the hierarchy. An allocation scheme specifies how revenues are distributed, as the hierarchy evolves. We obtain schemes that are socially optimal and initiator-optimal respectively. Our results have potential applications for blockchain, cryptocurrencies, social mobilization and multi-level marketing.
Original languageEnglish
Place of PublicationSevilla
PublisherUniversidad Pablo de Olavide
Number of pages35
Publication statusPublished - 3 Aug 2021
SeriesWorking Paper Series / Universidad Pablo de Olavide
NumberWP ECON 21.15


  • Optimal allocation schemes
  • Hierarchies
  • Management
  • Nash equilibrium
  • Blockchain

Cite this