This paper explores the effect on costs when firms within an industry must interact with each other in the normal course of business. Such interaction will generally cause the socially optimal scale of each firm to deviate from its minimum average cost scale. In addition, the socially optimal...

Using private information and club theories, this paper develops a theory of firms in general equilibrium. Firms are defined to be assignments of technologies and agents to clubs. In equilibrium, firms form endogenously and multiple types may co-exist. We formulate the general equilibrium...