3.1 Why Are There Firms? - Readings

Recommended Readings:

• Coase (1937), “The Nature of the Firm”
• Munger (2007), “I’ll Stick With These: Some Sharp Observations on the Division of Labor”
• Smith (1776), Wealth of Nations, Book I, Chs. 1-3
• Stigler (1951), “The Division of Labor is Limited by the Extent of the Market”

The free IO textbook does a good job covering the theory of the firm in Chapter 3:

• Ch. 3.2 in Jeffrey Church and Roger WareIndustrial Organization: A Strategic Approach (New York: McGraw-Hill, 2000).
  
  Again, there is a free PDF from the authors.
  
  

Much of the rest of their discussion in Chapter 3 we will cover over the next few classes (asset specificity theory, vertical integration, etc.)