Friday, October 23, 2009

Can any good thing come out of Superior?

First Bud Grant, now this.

Oliver E. Williamson, US citizen. Born in 1932 in Superior, WI, USA. Ph.D. in Economics in 1963 from Carnegie Mellon University, Pittsburgh, PA, USA. Edgar F. Kaiser Professor Emeritus of Business, Economics and Law and Professor of the Graduate School, both at the University of California, Berkeley, USA.

Oliver Williamson has argued that markets and hierarchical organizations, such as firms, represent alternative governance structures which differ in their approaches to resolving conflicts of interest. The drawback of markets is that they often entail haggling and disagreement. The drawback of firms is that authority, which mitigates contention, can be abused. Competitive markets work relatively well because buyers and sellers can turn to other trading partners in case of dissent. But when market competition is limited, firms are better suited for conflict resolution than markets. A key prediction of Williamson's theory, which has also been supported empirically, is therefore that the propensity of economic agents to conduct their transactions inside the boundaries of a firm increases along with the relationship-specific features of their assets.

I like the co-winner better, really.

Whattaya expect from Souptown?


LibertyBob said...

Did that just suggest that a person involved with a firm might act in their own best interest even if it isn't for the greater good if the firm's reward structure rewards that sort of activity?

Al said...

It depends on what the meaning of the phrase "relationship-specific features of their assets" is.