Location of Repository

Employment relations

By Harald Wiese and Universität Leipzig

Abstract

What kind of economic activity is conducted through markets and what kind is conducted through firms? We approach this Coaseian question by way of an employment relation between players. Every players has an endowment of 100 % of his time. He may choose to give away part of his time to other players. We will work the employment relation into characteristic functions (cooperative game theory). Here, one can proceed via Owen’s (1970) multilinear extension. However, we prefer the minimum extension. For two agents, we find (as Coase suggested) that firms spring up in response to market inefficiencies and that markets will prevail if organizational inefficiencies are profound. More specificly, cross employment (one agent employing the other and vice versa) may well happen. Also, the more productive agent is more likely to employ the less productive one than the other way around

Topics: Boundaries of the firm, employment relation, welfare maximization, Pareto efficiency, market inefficiency, organizational inefficiency, Shapley value
Year: 2004
OAI identifier: oai:CiteSeerX.psu:10.1.1.197.2807
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://citeseerx.ist.psu.edu/v... (external link)
  • http://www.uni-leipzig.de/~mic... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.