NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Reference Points and the Theory of the Firm

Oliver D. Hart

NBER Working Paper No. 13481
Issued in October 2007
NBER Program(s):   CF   LE

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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Published: Oliver Hart, 2008. "Economica Coase Lecture Reference Points and the Theory of the Firm," Economica, London School of Economics and Political Science, vol. 75(299), pages 404-411, 08.

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