search query: @author Mathewson, G. F. / total: 4
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| Author: | Carr, J. L. Mathewson, G. F. |
| Title: | Unlimited liability as a barrier to entry. |
| Journal: | Journal of Political Economy
1988 : AUG, VOL. 96:4, p. 766-784 |
| Index terms: | LIABILITY ENTRY CONDITIONS |
| Language: | eng |
| Abstract: | Many but not all firms have the freedom to choose liability rules. In some countries, service professions have unlimited liability rules imposed by government; historically banks in some countries faced unlimited liability. The question is why do governments impose unlimited liability? With a simple model, the agency conflicts in firms are illustrated. Limited liability solves these conflicts efficiently. Unlimited liability raises the cost of capital; inefficiently small firms result. But under some conditions selectively applied unlimited liability rules protect rents. |
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