Coase's View on the Employment Contract
According to Ronald Coase's 1937 paper 'The Nature of the Firm', the contract that defines employment within a firm is one in which an employee, for a specific payment, agrees to follow the directives of the entrepreneur. This highlights that relationships inside a firm are based on authority and command, rather than on market-based price signals.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
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Coase's View on the Employment Contract
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Learn After
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According to Ronald Coase's view on the nature of the firm, the relationship between a manager and a subordinate is best characterized as a continuous series of market-based exchanges, where each directive is individually priced and negotiated.