Firms, Organizations and Contracts: A Reader in Industrial Organization

By Peter J. Buckley; Jonathan Michie | Go to book overview

1 The Equilibrium of the Firm

Nicholas Kaldor


I

The exploration of the conditions of equilibrium of the individual firm has in recent times occupied to an increasing degree the attention of economists. This, as should be evident, was a necessary development of the so-called 'particular equilibrium' method of analysis developed by Marshall and especially of the conception of the 'supply-curve': the postulation of a definite functional relationship between price and rate of supply in the various industries. The latter, though an integral part of the Marshallian system, was by no means such a straightforward self-evident conception as its counterpart, the demand curve. The reasons for this asymmetry are not far to seek. The assumption that buyers respond to price stimuli in a definite and unequivocal manner (which is all that the demand curve implies) can be deduced from the general proposition that they have a definite system of wants and act in accordance with it; that is to say, it can be directly derived from the general postulates of the subjective theory of value. But the assumption that sellers do the same is a much more complex affair--at any rate in a world where production is carried on on a co-operative basis. It implies that there exists a mechanism which translates technical and psychological resistances into cost computations in such a way that a definite amount of a commodity will be offered by each producing unit in response to any price. It implies, therefore, that there is a definite relationship between the costs incurred and the amount produced for each individual source of supply and between price and the number of such producing units; and finally between price and some derivative of the cost function of the individual producing unit. Briefly then, it assumes two things: perfect

-23-

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Firms, Organizations and Contracts: A Reader in Industrial Organization
Table of contents

Table of contents

  • Title Page iii
  • Preface and Acknowledgements v
  • Acknowledgements vi
  • Contents viii
  • List of Contributors xi
  • Foreword xiii
  • Introduction and Overview 1
  • Notes 18
  • References 20
  • I. THEORY OF THE FIRM 21
  • 1: The Equilibrium of the Firm 23
  • 2: The Nature of the Firm 40
  • 3: The Organization of Industry 59
  • 4: Production, Information Costs, and Economic Organization 75
  • Summary 95
  • Notes 96
  • References 102
  • 5: Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure 103
  • Conclusions 151
  • Notes 151
  • References 163
  • 6: Transaction-Cost Economics: The Governance of Contractual Relations 168
  • Conclusion 192
  • 7: An Economist's Perspective on the Theory of the Firm 199
  • Conclusion 212
  • Notes 212
  • II. MARKETS AND INDUSTRIAL ORGANIZATION 219
  • 8: Corporate Culture and Economic Theory 221
  • Introduction 221
  • Conclusion 261
  • Appendix 262
  • Appendix 271
  • Appendix 273
  • References 274
  • 9: Co-operative Agreements and the Organization of Industry 276
  • References 292
  • 10: Interpenetration of Organization and Market: Japan's Firm and Market in Comparison with the US 293
  • Conclusion 317
  • References 319
  • 11: Vertical Quasi-Integration 320
  • Conclusions 336
  • Notes 337
  • 12: Non-Contractual Relations In Business: A Preliminary Study 339
  • 13: Goodwill and the Spirit of Market Capitalism 359
  • III. JOINT VENTURES, NETWORKS, AND] CLANS 383
  • III. JOINT VENTURES, NETWORKS, AND] CLANS 385
  • References 407
  • 15: Joint Ventures 410
  • Conclusion 427
  • References 428
  • 16: Organizations: New Concepts for New Forms 429
  • Conclusion 440
  • Notes 441
  • 17: Markets, Bureaucracies, and Clans 442
  • References 456
  • Notes 459
  • References 473
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