PHDBA602 (Theory of the Firm)

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PHDBA602 is a (for credit) Directed Studies course, that doctoral students can use to develop their own courses with a professor. This page provides information about a directed study course with Steve Tadelis on that centers arounds models that provide theories of the firm.


The format is:

  • One, perhaps two, models per class
  • One class per week, with a timeslot TBD.
  • The student will write up the model ahead of time (on this wiki)
  • The class will be used to:
    • Discuss intricacies of the model
    • Discuss modelling choices, with a view to helping the student understand how to build models
    • Place the model in the context of the broader literature


General Overviews

  • Gibbons, Robert (2005), "Four formal(izable) theories of the firm?", Journal of Economic Behavior & Organization, vol. 58, pp.200-245. pdf (stub)
  • Holmstrom, Bengt R. and Jean Tirole (1989), "Chapter 2 The theory of the firm", In: Richard Schmalensee and Robert Willig, Editor(s), Handbook of Industrial Organization, Elsevier, Volume 1, Pages 61-133. pdf

Background Literature

  • Alchian, Armen A. and Harold Demsetz (1972), "Production, Information Costs, and Economic Organization", The American Economic Review, Vol. 62, No. 5. (Dec.), pp. 777-795 pdf (stub)
  • Coase, Ronald (1937), "The Nature of the Firm", Economica. pdf (stub)

Transaction Cost Economics

  • Klein, Benjamin Robert, G. Crawford, and Armen A. Alchian (1978), "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process", Journal of Law and Economics, Vol. 21, No. 2. (Oct.), pp. 297-326 pdf (stub)
  • Williamson, Oliver E. (1971), "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, 61:112-23. pdf
  • Williamson, Oliver (1979), "Transaction-Cost Economics: The Governance of Contractual Relations", Journal of Law and Economics, Vol. 22, No. 2. (Oct.), pp. 233-261. pdf
  • Williamson, Oliver (1991), "Comparative Economic Organization: The Analysis of Discrete Structural Alternatives", Administrative Science Quarterly, Vol. 36, No. 2. pp. 269-296 pdf
  • Williamson, Oliver E. (1999), "Public and Private Bureaucracies: A Transaction Costs Economics Perspective", Journal of Law, Economics and Organization, Vol 15, March pp. 306-342. pdf

Property Rights Model

  • Grossman, Sanford J. and Oliver D. Hart (1986), "The Costs and Benefits of Ownership: A Theory of Vertical Integration", Journal of Political Economy, vol.94, pp. 691-719. pdf (stub)
  • Hart, Oliver and John Moore (1990), "Property Rights and the Nature of the Firm", The Journal of Political Economy, Vol. 98, No. 6, Dec., pp. 1119-1158 pdf (stub)


  • Holmstrom, Bengt and Paul Milgrom (1991), "Multi-Task Principal-Agent Analyses: Linear Contracts, Asset Ownership and Job Design", Journal of Law, Economics and Organization, Vol. 7, pp. 24-52. pdf (stub)


Relational Contracting

Firm Boundaries