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Transaction-Specific Investments and Organizational Choice: A Coase-to-Coase Theory

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  • Thomas J. Miceli

    (University of Connecticut)

Abstract

This paper examines markets, firms, and the law as alternative institutional arrangements for organizing transactions that involve transaction-specific investments and uncertain performance. The analysis is the logical extension of Coase’s seminal analysis of the market-firm boundary on one hand, and the market-law boundary on the other. It thus combines insights from the literature on industrial organization and law and economics. The result is a unified framework that reveals the relative advantages and disadvantages, within a fairly simple economic setting, of market exchange, court ordering (contracts), and internal governance (agency).

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File URL: http://web2.uconn.edu/economics/working/2014-06.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2014-06.

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Length: 26 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:uct:uconnp:2014-06

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Web page: http://www.econ.uconn.edu/
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Keywords: Asset specificity; contracts; firms; holdup problem; market exchange;

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  1. Segal, Ilya, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 57-82, January.
  2. William P. Rogerson, 1984. "Efficient Reliance and Damage Measures for Breach of Contract," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 39-53, Spring.
  3. Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
  4. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
  5. Aaron S. Edlin & Stefan Reichelstein, 1995. "Holdups, Standard Breach Remedies, and Optimal Investment," NBER Working Papers 5007, National Bureau of Economic Research, Inc.
  6. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  7. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
  8. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  9. Steven Shavell, 1980. "Damage Measures for Breach of Contract," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 466-490, Autumn.
  10. White, Michelle J, 1988. "Contract Breach and Contract Discharge Due to Impossibility: A Unified Theory," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 353-76, June.
  11. Oliver Hart, 2011. "Thinking about the Firm: A Review of Daniel Spulber's The Theory of the Firm," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 101-13, March.
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