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Lecture+11+October+12

Lecture+11+October+12 - Todays agenda 2009 Nobel Prize...

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Today’s agenda 2009 Nobel Prize Budget lines and budget sets Preferences Indifference curves Optimum consumption bundles Demand curves from indifference curves and budget lines
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2009 Nobel Prize in Economics Oliver Williamson Elinor Ostrom Economic governance Markets v. firms
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Markets and firms as alternative governance structures Differ in how they resolve conflicts of interest Drawback of markets: haggling and disagreement In firms, these problems are smaller; can resolve conflicts through use of authority (though authority can be abused). Markets with many similar sellers and buyers: conflicts tolerable since sellers and buyers can exit and trade with others. Greater their mutual dependence , more likely people are to conduct their transactions inside a firm’s boundary . Degree of mutual dependence: largely determined by extent to which assets can be redeployed outside the relationship. A coal mine and a nearby electric generating plant are more likely to be jointly incorporated the greater the distance to other mines and plants.
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