Reference Points and the Theory of the Firm
17 Pages Posted: 15 Oct 2007 Last revised: 11 Dec 2007
Date Written: October 2007
In this article I argue that it has been hard to make progress on Coase's theory of the firm agenda because of the difficulty of formalizing haggling costs. I propose an approach that tries to move things forward using the idea of aggrievement costs, and apply it to the question of whether a transaction should be placed inside a firm (in-house production) or in the market place (outsourcing).
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