Both asset ownership and contracts play important roles in providing incentives for relationship specific investments, and hence in determining the boundary of the firm. Significant progress has been made in understanding the roles that these instruments play, but largely in isolation from each...

The FDA employs an average-patient standard when reviewing drugs: it approves a drug only if is safe and effective for the average patient in a clinical trial. It is common, however, for patients to respond differently to a drug. Therefore, the average-patient standard can reject a drug that...