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THE ‘REFERENCE POINT’ APPROACH TO THE THEORY OF THE FIRM: AN INTRODUCTION
Author(s) -
Walker Paul
Publication year - 2013
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.2011.00714.x
Subject(s) - transaction cost , point (geometry) , economics , ex ante , theory of the firm , database transaction , property rights , mathematical economics , property (philosophy) , microeconomics , computer science , macroeconomics , mathematics , programming language , epistemology , philosophy , geometry
There is a small but growing literature on the ‘reference point’ approach to incomplete contracts as formulated by Hart and Moore. The reference point approach has begun to be applied to the theory of the firm in 3 recent papers. This introduction reviews the main theoretical aspects of each of these papers. It then discusses the relationship between the reference point approach to the firm, the transaction cost approach and the property rights approach. Here it is argued that the reference point approach is a step back towards ex post inefficiencies, away from reliance on ex ante inefficiencies.