Incomplete Contracts and Economic Organization

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Incomplete Contracts and Economic Organization

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Title: Incomplete Contracts and Economic Organization
Brian Loasby and the Theory of the Firm
Author: J. Foss, Nicolai
Abstract: The paper begins by providing a brief overview and discussion of the modern economics of organization, concentrating in particular on the work of incomplete contract theorists. I then turn to a discussion of Loasby’s view of the firm and incomplete contracts. The point here is that while Loasby begins from the same recognition as modern incomplete theorists, that contractual incompleteness is a necessary component of a theory of the firm, the causes and consequences of contractual incompleteness are widely different. Thus, Loasby sees incompleteness as a distinct virtue because it allows for organizational learning, whereas incompleteness in the modern economics of organization is seen as a distinct problem because it opens the door to incentive conflicts. I end by speculating on how Loasby’s non-mainstream ideas on economic organization may be related to some relatively mainstream ideas about alternative gameforms and real options.
URI: http://hdl.handle.net/10398/8112
Date: 2010-07-02

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