Law 2101 Study Guide - Quiz Guide: Ex-Ante, Agency Cost, Impermanence
Document Summary
In his 1937 article coase argued that firms will come about because of the following: In his 1960 paper on social cost coase argued that if there are no or low transaction costs people will come to the most efficient distribution. The 1937 article thus shows how transaction costs can hinder the most efficient allocation. 3. 2 advantages and disadvantages of: sole proprietorship: disadvantage: how to raise capital, partnership: more capital than sp, but personal liability and impermanence, corporation: raising capital easier, limited liability. 3. 3 miscellaneous: economic rationale for limited liability: Risk instead borne by creditors of the corporation, who are paid for taking the risk. They can diversify, assess the risk better, and are less risk-averse: reasons to pierce the corporate veil: In case of misrepresentation, where separate incorporation misleads creditors into thinking they"re dealing with a single corporation. At time of accident, when compensation is due, etc. )
