Agency Problems and Residual Claims

Abstract

SOCIAL and economic activities, such as religion, entertainment, education, research, and the production of other goods and services, are carried on by different types of organizations, for example, corporations, proprietorships, p artnershipsm, utuals,a nd nonprofits.M ost goods and services can be produced by any form of organization, and there is competition among organizational forms for survival in any activity. Absent fiat, the form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs. This is the telling dimension on which the economic environment chooses among organizational forms.