IDEAS home Printed from
   My bibliography  Save this article

Employment Relations and the Boundaries of the Firm


  • Harald Wiese

    () (Department of Economics, University of Leipzig, Germany)


What kind of economic activity is conducted through markets and what kind is conducted through firms? We approach this Coaseian question by way of an employment relation between players. Every player has an endowment of 100% of his time. He may choose to give away part of his time to other players. We will work the employment relation into characteristic functions (cooperative game theory). Here, one can proceed via OwenÆs (1970) multilinear extension or LovaszÆ (1983) minimum extension. We will argue for the minimum extension. For two agents, we find (as Coase suggested) that firms spring up in response to market inefficiencies and that markets will prevail if organizational inefficiencies are profound. More specifically, cross employment (one agent employing the other and vice versa) may well happen. Also, the more productive agent is more likely to employ the less productive one than the other way around.

Suggested Citation

  • Harald Wiese, 2005. "Employment Relations and the Boundaries of the Firm," Homo Oeconomicus, Institute of SocioEconomics, vol. 23, pages 347-369.
  • Handle: RePEc:hom:homoec:v:23:y:2005:p:347-369

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434-434.
    2. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, March.
    3. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309-309.
    4. Jonathan Levin & Barry Nalebuff, 1995. "An Introduction to Vote-Counting Schemes," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 3-26, Winter.
    5. Hillinger, Claude, 2004. "On the Possibility of Democracy and Rational Collective Choice," Discussion Papers in Economics 429, University of Munich, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hom:homoec:v:23:y:2005:p:347-369. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.