Cover: Market structure, market conditions, product characteristics, and the theory of the firm

Market structure, market conditions, product characteristics, and the theory of the firm

Published 1979

by David Scott Lindsay

Purchase Print Copy

 Format Price
Add to Cart Paperback29 pages $20.00

A number of explanations have been offered in the literature concerning the nature and formation of the firm as well as the contractual arrangements that arise among firms. This paper extends the theory of the firm by examining the intrafirm/interfirm transaction spectrum under conditions of imperfect competition. In particular, a model of successive monopoly is introduced in order to explain the phenomena of vertical integration, franchise, and contract--the range of the above mentioned spectrum. The analysis reveals that the optimizing strategy of a firm (selection of the optimal position within the transaction spectrum) is a function of market structure, market conditions and product characteristics. In addition, this study provides some answers to persistent questions related to production externalities, collusion, price fixing, contract enforcement and advertising.

This report is part of the RAND paper series. The paper was a product of RAND from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.