The Firm as a Semilattice of Activity: Prolegomenon to a Theory of the Firm

Abstract

This paper develops a new theory of agency in which agents make use of hierarchies of plans which they successively select and refine until they have plans of action that can be implemented. Each hierarchy of plans has the structure of a semilattice. This analytical decision making framework is used to explore such issues as: why firms exist, how they operate in more or less entropic environments, and how bounded rationality impacts on their ability to settle upon optimal plans. The theory is in a preliminary stage of development.

Keywords: planning, hierarchy, semilattice, theory of the firm

JEL Classification: D21, D81