This paper extends the principal-agent model to determine the size of the firm as measured by the number of agent hired. Hiring more agents results in benefits and costs to the principal. The benefits are gains from specialization: higher productivity can be achieved if, as the number of agents...

In this paper I study how the make-or-buy decision of a firm depends on the organization of its peers. I consider a multi-firm framework in which firms choose whether to integrate into the supply of an intermediate input or to outsource its production, and choose the size of their supplier...

In this paper we consider the problem of the control of access to a firm's productive asset, embedding the relevant decision makers into a general structure of formal authority relations. Within such an authority structure, each decision maker acts as a principal to some decision makers, while...

This paper presents a formal model of tunneling and propping in a pyramidal ownership structure. Tunneling refers to controlling shareholders shifting funds from one firm to another in the same pyramid. Propping is tunneling that is done to save the receiving firm from bankruptcy. We compare the...

This paper studies the effects of product market competition on vertical integration. In a duopoly setting, each retailer is associated with a manufacturer who must decide how to allocate property rights over the retail asset. Choosing delegation of property rights over vertical integration...

The access pricing problem emerges when a vertically integrated firm (the incumbent) provides an essential service in the upstream market, to an entrant. Both firms produce a final service and compete in the downstream market. The standard treatment of this problem has been to add the access...

Consider the case of a firm with private valuation information bargaining with a supplier over the price and quantity of a good. If the firm and the supplier bargain directly, the bargaining outcome may not yield a first-best outcome due to the presence of information rents. The question we...

This paper derives firm boundaries as the outcome of an equilibrium coordination mechanism. The analysis is premised on the notion that efficient production and distribution are achieved through a mechanism that coordinates three basic activities: i) input acquisition, ii) production, iii)...

Most existing theories of the firms define a firm as a collection of physical assets, and hence can not explain the firm from a human-asset perspective, which is of particular importance for understanding human-capital intensive firms. To fill in the gap, this paper proposes an alternative...

This paper provides a framework that aims at distinguishing the technological economies of vertical integration from the vertical economies resulting from market imperfections. To illustrate our analyze, we use consistent panel data econometric methods to estimate cost functions on a sample of...