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Endogenous Specialization, Endogenous Transaction Costs, And The Theory Of The Firm

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  • XIAOKAI YANG

    (Department of Economics, Monash University, Clayton, Victoria, 3800, Australia)

Abstract

In the paper the trade-offs among endogenous transaction costs caused by two-sided moral hazard, exogenous monitoring cost, and economies of specialization are specified in a Grossman, Hart and Moore (GHM) model to absorb Maskin and Tirole's recent critique and Holmstrom and Milgrom's criticism of the model of incomplete contract. The extended GHM model allowing incomplete contingent labour contract as well as complete contingent trade contract of goods is used to explore the implications of structure of ownership and residual rights for the equilibrium network size of division of labour and productivity.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Division of Labor & Transaction Costs.

Volume (Year): 01 (2006)
Issue (Month): 02 ()
Pages: 105-126

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Handle: RePEc:wsi:dltcxx:v:01:y:2006:i:02:p:105-126

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Related research

Keywords: Theory of the firm; incomplete labour contract; asymmetric authority; two-sided moral hazard; transaction cost; asymmetric residual rights; division of labour; specialization;

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