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The co‐operative nature of the firm: Narrative
Author(s) -
Ichiishi Tatsuro
Publication year - 1993
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090140503
Subject(s) - normative , mechanism (biology) , pareto principle , microeconomics , welfare , diversity (politics) , resource allocation , economics , game theory , theory of the firm , operations management , market economy , sociology , philosophy , epistemology , anthropology
The theory of the firm views the firm as an organization characterized by (1) diversity of (and, most likely, conflict among) the interests of its members and (2) in spite of such diversity, the member's acceptance of a co‐ordinated choice of activities. A firm is a coalition formed when people play a co‐operative game, and this co‐operative game is the firm‐specific resource allocation mechanism. The theory includes: study of a descriptive general equilibrium model which embodies both the co‐operative game (for allocation of human resources, in particular for formation of firms) and the neoclassical market mechanism (for allocation of non‐human resources); its welfare implications; study of a normative mechanism to implement Pareto optimality in the presence of increasing returns to scale; and characterizations of the coalitionally stable hierarchical structures in a firm in a partial equilibrium setup.