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Describe the Alchian and Demsetz Theory of Why Firms Exist

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Essay

Describe the Alchian and Demsetz theory of why firms exist. How does this differ from the Coase theory of why firms exist?


Definitions:

Perfect Competitor

A market structure where many firms sell identical products, allowing no single company to influence the market price.

Imperfect Competitor

A firm that has some control over the market price of its product because the product is differentiated and there are few substitutes.

Wage Rate

The amount of money paid to an employee per unit of time, often hourly or annually, for their labor.

Wage Rate

The amount of money paid to an employee for a specified quantity of work, usually expressed per hour or year.

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