Incomplete Contingent Labor Contract, Asymmetric Residual Rights and Authority, and the Theory of the Firm

Xiaokai Yang

No 45A, CID Working Papers from Center for International Development at Harvard University

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 labor contract as well complete contingent contract of goods trade is used to explore the implications of structure of ownership and residual rights for the equilibrium network size of division of implications of structure of ownership and residual rights for the equilibrium network size of division of labor and productivity.

Keywords: theory of the firm; incomplete labor contract; asymmetric authority; two-sided moral hazard; transaction cost; asymmetric residual rights; division of labor; specialization (search for similar items in EconPapers)
JEL-codes: D23 L11 L22 L23 (search for similar items in EconPapers)
Date: 2000-05
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Working Paper: Incomplete Contingent Labor Contract, Asymmetric Residual Rights and Authority, and the Theory of the Firm (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cid:wpfacu:45a

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