Governance of Adjustments
Massachusetts Institute of Technology (MIT) - Sloan School of Management
MIT Sloan Working Paper No. 4412-03
The article proposes a research program to compare game forms in terms of their ability to govern ex post adjustments to ex ante contracts. The comparisons can be based on direct implementation-costs or the extent to which desirable adjustments are not implemented. In several examples of the program, we compare three game forms: Negotiation over each adjustment, ex ante price lists, and implicit contracts leaving the stipulation of adjustments to one player. If the latter game form is defined as an employment relationship, the theory of the firm becomes a special case of the program. The article starts with a discussion of the nature and magnitude of adjustment-costs, followed by an exposition of four examples. We then discuss the role of asset ownership, review some empirical evidence, and look at broader implications.
Number of Pages in PDF File: 39
Keywords: Theory of the Firm, Employment Relationship, Contracts
JEL Classification: D2, L2working papers series
Date posted: February 26, 2003
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.281 seconds