2009 Nobel Prize in EconomicsOliver Williamson Elinor OstromEconomic governanceMarkets v. firms
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 exitand trade with others.•Greater their mutual dependence, more likelypeople are to conduct their transactions inside a firm’s boundary.•Degree of mutual dependence: largely determined by extent to which assets can be redeployedoutside 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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