We model technological progress as an external effect of organizational design, focusing on how factories, based on labor division, could spawn the Industrial Revolution. Dividing labor, as Adam Smith argued, facilitates invention by observers of production processes. However, entrepreneurs...

We embed a simple incomplete-contracts model of organization design in a standard two-country perfectly-competitive trade model to examine how the liberalization of product and factor markets affects the ownership structure of firms. In our model, managers decide whether or not to integrate...

We develop a tractable model of the allocation of ownership and control within firms operating in competitive markets. The model permits analysis of how the scarcity of assets in the market translates into ownership structures inside the organization. It identifies a price-like mechanism whereby...

We present sufficient conditions for monotone matching in environments where utility is not fully transferable between partners. These conditions involve not only complementarity in types of the total payoff to a match, as in the transferable utility case, but also monotonicity in type of the...

This article presents a perfectly competitive model of firm boundary decisions and study their interplay with product demand, technology, and welfare. Integration is privately costly but is effective at coordinating production decisions; nonintegration is less costly but coordinates relatively...

We study frictionless matching in large economies with and without market imperfections, providing sufficient conditions for monotone matching that are weaker than those previously known. Necessary conditions, which depend on a key analytical object we call the surplus function, are also...