ENDOGENOUS SPECIALIZATION, ENDOGENOUS TRANSACTION COSTS, AND THE THEORY OF THE FIRM

Yang, Xiaokai

ENDOGENOUS SPECIALIZATION, ENDOGENOUS TRANSACTION COSTS, AND THE THEORY OF THE FIRM

Division of Labor & Transaction Costs (DLTC), 2006, vol. 01, issue 02, 105-126

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.

Keywords: Theory of the firm; incomplete labour contract; asymmetric authority; two-sided moral hazard; transaction cost; asymmetric residual rights; division of labour; specialization (search for similar items in EconPapers)
JEL-codes: C62 D E1 F F11 F12 F16 J2 J3 L O (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219871106000093

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