Incomplete Contracts and Economic Organization: Brian Loasby and the Theory of the Firm

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Abstract

The paper begins by providing a brief overview and discussion of the modern
economics of organization, concentrating in particular on the work of incomplete contract theorists. I then turn to a discussion of Loasby’s view of the firm and incomplete contracts. The point here is that while Loasby begins from the same recognition as modern incomplete theorists, that contractual incompleteness is a necessary component of a theory of the firm, the causes and consequences of contractual incompleteness are widely different. Thus, Loasby sees incompleteness as a distinct virtue because it allows for organizational learning, whereas incompleteness in the modern economics of organization is seen as a distinct problem because it opens the door to incentive conflicts. I end by speculating on how Loasby’s non-mainstream ideas on economic organization may be related to some relatively mainstream ideas about alternative gameforms and real options.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherDRUID - Danish Research Unit for Industrial Dynamics
Number of pages48
ISBN (Print)8778730309
Publication statusPublished - 1997
SeriesDRUID Working Paper
Number97-11

Cite this

Foss, N. J. (1997). Incomplete Contracts and Economic Organization: Brian Loasby and the Theory of the Firm. DRUID - Danish Research Unit for Industrial Dynamics. DRUID Working Paper, No. 97-11