Econometrica: Mar 1977, Volume 45, Issue 2
Coalition Structure in a Labor-Managed Market Economy
Tatsuro IchiishiThe purpose of this paper is to present a model which explains the formation of firms in a market economy. This is done by unifying two recent developments in economic theory: the labor-managed market economy and the coalition production economy. D. Sondermann's model  of a coalition production economy with "increasing returns to coalition" is generalized. Specifically, the concept of coalition structures is introduced, so that the model can be naturally interpreted to represent a labor-managed market economy. Two kinds of specific interpretation are considered: one is a type of socialistic economy and the other a capitalistic economy.
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