Competititve Appropriation with Special Reference to Know-how

Abstract A formulation of task assignments along with a proprietary specification of know-how replaces the traditional description of production. In the resulting model, the phenomenon of internal organization reflects the necessarily partial role of the price system in an expanded description of resource allocation, in contrast to the view that internal organization is evidence of the price system's deficiency. The employment contract, where workers agree to take direction from an employer, is based on the employer's know-how, the payment to the employer reflecting the value of proprietary knowledge. From the appropriation perspective, restraints on shirking are adaptations allowing the employer to appropriate a greater fraction of the value of know-how, rather than the essence of the employment contract. The relation between ownership and control and opportunistic issues underlying the hold-up problem are similarly addressed as variations on the theme of appropriability