Coase theorem

About: Coase theorem is a research topic. Over the lifetime, 2464 publications have been published within this topic receiving 106800 citations.

The Nature of the Firm

Abstract: Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which it was erected. This examination is, however, essential not only to prevent the misunderstanding and needless controversy which arise from a lack of knowledge of the assumptions on which a theory is based, but also because of the extreme importance for economics of good judgement in choosing between rival sets of assumptions. For instance, it is suggested that the use of the word “firm” in economics may be different from the use of the term by the “plain man.”1 Since there is apparently a trend in economic theory towards starting analysis with the individual firm and not with the industry,2 it is all the more necessary not only that a clear definition of the word “firm” should be given but that its difference from a firm in the “real world,” if it exists, should be made clear. Mrs. Robinson has said that “the two questions to be asked of a set of assumptions in economics are: Are they tractable? and: Do they correspond with the real world?”3 Though, as Mrs. Robinson points out, “more often one set will be manageable and the other realistic,” yet there may well be branches of theory where assumptions may be both manageable and realistic. It is hoped to show in the following paper 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, together giving the idea of substitution at the margin.

Experimental Tests of the Endowment Effect and the Coase Theorem

Abstract: Contrary to theoretical expectations, measures of willingness to accept greatly exceed measures of willingness to pay. This paper reports several experiments that demonstrate that this "endowment effect" persists even in market settings with opportunities to learn. Consumption objects (e.g., coffee mugs) are randomly given to half the subjects in an experiment. Markets for the mugs are then conducted. The Coase theorem predicts that about half the mugs will trade, but observed volume is always significantly less. When markets for "induced-value" tokens are conducted, the predicted volume is observed, suggesting that transactions costs cannot explain the undertrading for consumption goods.

What Firms Do? Coordination, Identity, and Learning

Abstract: Firms are organizations that represent social knowledge of coordination and learning. But why should their boundaries demarcate quantitative shifts in the knowledge and capability of their members? Should not knowledge reside also in a network of interacting firms? This line of questioning presents the challenge to state an alternative view to the “theory of the firm,” a theory that has moved from Coase's early treatment of what firms do to a concern with ownership, incentives, and self-interest. We return to Coase's original insight in understanding the cost and benefits of a firm but based on a view that individuals are characterized by an “unsocial sociality.” Does the perception of opportunism generate the need to integrate market transactions into the firm, or do boundaries of the firm lead to the attribution of opportunism? This basic dichotomy between self-interest and the longing to belong is the behavioral underpinning to the superiority of firms over markets in resolving a fundamental dilemma: p...

Two-sided markets: a progress report

Abstract: The paper provides a road map to the burgeoning literature on two-sided markets and presents new results. It identifies two-sided markets with markets in which the structure, and not only the level of prices charged by platforms matters. The failure of the Coase theorem is necessary but not sufficient for two-sidedness. The paper builds a model integrating usage and membership externalities, that unifies two hitherto disparate strands of the literature emphasizing either form of externality, and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end-users.

The new institutional economics

Abstract: This outstanding book presents new original contributions from some of the world’s leading economists including Ronald Coase, Douglass C. North, Masahiko Aoki, Oliver E. Williamson and Harold Demsetz. It demonstrates the extent and depth of the New Institutional Economics research programme which is having a worldwide impact on the economics profession.