Liquidity considerations will limit the number of markets in a competitive economy. Welfare implications are ambigious. Since liquidity is a positive externality, there may be too little liquidity per market at a noncooperative equilibrium and too many markets compared to the surplus-maximizing...

The probability that an unskilled worker can be successfully trained or screened to be a manager depends on the effort of the firm. With positive hiring costs, a firm prefers to train/screen its own managers. However, the optimal size of the firm for productive efficiency may conflict with...