The Firm in Economics and Antitrust Law
ISSUES IN COMPETITION LAW AND POLICY, Vol. 1, pp. 249-272, W. Collins, ed., American Bar Association Section, 2008
24 Pages Posted: 9 Jul 2011
Date Written: 2008
Economic theories of the firm are categorized into two types of theories – those that emphasize the role of the firm in mitigating holdup problems by firm ownership of residual control rights and those that emphasize the role of the firm in mitigating incentive problems by firm ownership of residual profit rights. The economic definition of the firm that corresponds most closely with legal and common usage focuses on the ownership of residual control rights achieved through integration. This economic definition of the firm is fully consistent with the legal principles set forth in Copperweld but is inconsistent with the “unity of interests” criterion sometimes used in antitrust law.
JEL Classification: L20, K21
Suggested Citation: Suggested Citation