Economics 486
The Economics of
Organization
Spring
2004
Mondays 2-4:30
Monteith 311
R. N. Langlois
322 Monteith X63472
Office
hours MW 9-12 and 1-2 or by appointment
Assignment 2
In its most basic form, the theory of asset
specificity predicts that internal organization is most likely to supersede
independent ownership and market transaction to the extent that the assets
involved are highly specific to the transaction. Asset specificity is measured by the liquidity or fungibility of
the assets: highly specific assets lose much of their value outside of the
transaction, whereas non-specific assets are easily sold on liquid markets for
most of their original value.
Consider now the business of long-haul
trucking. Trucks would seem clearly to
be nonspecific assets: they are generic with respect to particular hauls, and
there is a thick market for used trucks.
This we would expect that most trucks would be operator owned and
truckers would be independent contractors using the market rather than
employees of trucking firms.
Surprisingly, perhaps, it turns out that two-thirds of long-haul
truckers are in fact employees not owner operators. In a recent paper,
Jack Nickerson and Brian Silverman have attempted to reconcile this finding
with asset specificity theory. You
assignment is to judge whether they are successful. How exactly do they attempt to reconcile asset-specificity theory
with the facts of long-haul trucking?
Are they successful? What does
the case of trucking say about the theory of asset specificity?
In addition to the Nickerson
and Silverman paper, you should look at the readings in the asset-specificity
section of the syllabus. You may also
find the following useful:
George
P. Baker and Thomas N. Hubbard, "Contractibility
and Asset Ownership: On-Board Computers and Governance in U.S. Trucking."
Francine
Lafontaine and Scott E. Masten, "Contracting in the Absence of Specific
Investments and Moral Hazard: Understanding Carrier-Driver Relations in U.S.
Trucking," NBER Working
Paper No. w8859, 2002.
Due: February 23.
