Property Rights and the Nature of the Firm
Oliver Hart,John Moore +1 more
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In this article, the authors provide a framework for addressing the question of when transactions should be carried out within a firm and when through the market, by identifying a firm with the assets that its owners control.Abstract:
This paper provides a framework for addressing the question of when transactions should be carried out within a firm and when through the market. Following Grossman and Hart, we identify a firm with the assets that its owners control. We argue that the crucial difference for party 1 between owning a firm (integration) and contracting for a service from another party 2 who owns this firm (nonintegration) is that, under integration, party 1 can selectively fire the workers of the firm (including party 2), whereas under nonintegration he can "fire" (i.e., stop dealing with) only the entire firm: the combination of party 2, the workers, and the firm's assets. We use this idea to study how changes in ownership affect the incentives of employees as well as those of owner-managers. Our framework is broad enough to encompass more general control structures than simple ownership: for example, partnerships and worker and consumer cooperatives all emerge as special cases.read more
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Journal ArticleDOI
The Nature of the Firm
TL;DR: In this paper, it is shown that a definition of a firm may be obtained which is not only realistic in that it corresponds to what is meant by a firm in the real world, but is tractable by two of the most powerful instruments of economic analysis developed by Marshall, the idea of the margin and that of substitution.
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Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education
TL;DR: In this paper, the effects of investment in education and training on earnings and employment are discussed. But the authors focus on the relationship between age and earnings and do not explore the relation between education and fertility.
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Markets and Hierarchies: Analysis and Antitrust Implications.
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Production, Information Costs, and Economic Organization
Armen A. Alchian,Harold Demsetz +1 more