"Oliver Williamson has argued that markets and hierarchical organizations, such as firms, represent alternative governance structures which differ in their approaches to resolving conflicts of interest. The drawback of markets is that they often entail haggling and disagreement. The drawback of firms is that authority, which mitigates contention, can be abused. Competitive markets work relatively well because buyers and sellers can turn to other trading partners in case of dissent. But when market competition is limited, firms are better suited for conflict resolution than markets. A key prediction of Williamson's theory, which has also been supported empirically, is therefore that the propensity of economic agents to conduct their transactions inside the boundaries of a firm increases along with the relationship-specific features of their assets."
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The Royal Swedish Academy of Sciences. "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009: Press Release," on nobelprize.org, 12 October 2009.
https://en.wikiquote.org/wiki/New_institutional_economics
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New institutional economics
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