Economics 2129A/B Lecture Notes - Lecture 5: Sole Proprietorship
12 Mar 2015
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Document Summary
Refers to the right to make decisions within the firm: residual claimant rights or profits (losses) Refers to the right to receive (share of) net revenues (excess over costs): public (state-owned organization -soe"s, control decisions made by cabinet, elect ceo"s, taxpayers have residual claimant rights (goes into treasury) o. "separation of residual claimant rights from control rights: non-profit, non-distribution constraint. Managers, employees, directors of the firm cannot receive any net revenues generated - are not liable for any losses. No residual claims: sole proprietorship: single individual has all residual claimant and control rights, partnership: n > 1 individuals (partners) share both sets of rights.
