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Markets, Contracts, and Firms: A Unified Model of Organizational Choice

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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 examination 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).

Suggested Citation

  • Thomas J. Miceli, 2011. "Markets, Contracts, and Firms: A Unified Model of Organizational Choice," Working papers 2011-08, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2011-08
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    More about this item

    Keywords

    Asset specificity; contracts; firms; markets; transaction costs;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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