Alchian and Demsetz (1972) agreed in general with Coase’s (1937) position that using the market involved costs but took some exception to his

Alchian and Demsetz (1972) agreed in general with Coase’s (1937) position that using the market involved costs but took some exception to his emphasis on “hierarchy” as the source of a firm’s advantage over markets. Which statement(s) is (are) consistent with the position taken by Alchian and Demsetz? a. Authority and hierarchy are not necessarily more efficient or effective than markets in directing resources (one doesn’t have to employ his grocer in order to direct him or “fire” him). b. Firms emerge to coordinate cooperative, team-based production that involves the joint use of resources or non-separable processes and hence difficult-to-meter contributions to output. c. Managers coordinate the teams but their own motivation comes from a claim on the residual value created by the efforts of the teams under their direction d. The quality and intensity of the link between managers’ rewards and their contribution to residual value are useful basis of characterizing firms (broadly defined) or predicting the intensity of their profit-seeking behavior. e. All of the above are consistent with the Alchian and Demsetz framework.