A rank size rule in a firm, produced from a hierarchical branch office location model

Although many studies of the rank-size rule have examined cities, few have provided a micro-behavioral foundation for the rule itself. Using a hierarchical branch office location model, this study confirmed that the rank-size rule appears in the hierarchical structure of a firm calculated using the model. Results show that the power coefficient does not change through a numerical decrease in branch offices when the branch set-up cost increases. Results also show, however, that the power coefficient becomes larger and that employment becomes more evenly distributed when the effectiveness of branch offices, in terms of the ability to compress and aggregate business information, is enhanced. Progress in information and communications technology (ICT) has enhanced the effectiveness of branch offices. Therefore, a flatter organization of firms can be expected in the future.