Matching Problems with Expertise in Firms and Markets

When should expertise be shared in markets and when in …firms? Knowl-edge exchanges in the market involve less information about the quality ofthe provider's expertise, but facilitate good utilization of experts knowledge.In a …rm, management holds soft information about individuals expertiseand thus improves on the matching of experts to problems; however, theusage of experts is not smooth and thus …firms experience over or under-utilization of experts'time. Thus the trade-o¤ between fi…rms and marketsis between utilization (the market allows for better, smoother, utilizationof knowledge than …firms) and the quality of matching between problemsand problem solvers (the market provides less information about experts'quality).[...]