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Coase meets Tarski: New Insights from Coase's Theory of the Firm

Author

Listed:
  • Tomoo Kikuchi

    () (Department of Economics, National University of Singapore)

  • Kazuo Nishimura

    () (Institute of Economic Research, Kyoto University)

  • John Stachurski

    () (Research School of Economics, The Australian National University)

Abstract

This paper formulates a model embedding the key ideas from Ronald Coase’s famous essay on the theory of the firm in a simple competitive equilibrium setting with anarbitrary number of firms. The model studies the structure of production when transaction costs and diminishing returns to management are treated as given. In addition to recovering Coase’s main insights as equilibrium conditions, the model yields many new predictions on prices, firm boundaries and division of the value chain.

Suggested Citation

  • Tomoo Kikuchi & Kazuo Nishimura & John Stachurski, 2012. "Coase meets Tarski: New Insights from Coase's Theory of the Firm," KIER Working Papers 828, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:828
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP828.pdf
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    References listed on IDEAS

    as
    1. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
    2. Arnaud Costinot & Jonathan Vogel & Su Wang, 2013. "An Elementary Theory of Global Supply Chains," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 109-144.
    3. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
    4. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics Princeton University Press.
    5. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 809-839.
    6. Philippe Aghion & Richard Holden, 2011. "Incomplete Contracts and the Theory of the Firm: What Have We Learned over the Past 25 Years?," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 181-197, Spring.
    7. Justin Sandefur, 2010. "On the Evolution of the Firm Size Distribution in an African Economy," CSAE Working Paper Series 2010-05, Centre for the Study of African Economies, University of Oxford.
    8. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    9. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
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    Citations

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    Cited by:

    1. Paul Walker, 2015. "Contracts, Entrepreneurs, Market Creation And Judgement: The Contemporary Mainstream Theory Of The Firm In Perspective," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 317-338, April.
    2. Yuan Zi, 2014. "Trade Costs, Global Value Chains and Economic Development," CTEI Working Papers series 06-2014, Centre for Trade and Economic Integration, The Graduate Institute.

    More about this item

    Keywords

    Transaction costs; vertical integration; production chains;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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