Can trade and exchange occur within the firm without the existence of private pr

Question

Can trade and exchange occur within the firm without the existence of private property rights? If individual property rights are necessary for economic success, how might the firm allow property rights?

What are the “boundaries” of a firm? What determines the extent of vertical boundaries? What determines the extent of horizontal integration? Use a cost-benefit analysis to describe the optimal boundaries of a firm.

Why does the evolution of large firms lead to a principal-agent problem? How can the principal-agent problem between owners and managers be minimized?

Explanation / Answer

First question is answered below.

No, in order for successful trade and exchange to occur, it is important that the agents have well-defined property rights, else it would lead to clashes and mismanagement.

Firm would allow property rights so as to make each person accountable for their duties and responsibilities. Allowing property rights to individuals is important to provide ownership maintenance and value to a resource within the firm.

It is important to note that no exchange is possible without property rights being well defined for agents.

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