Katharina Pistor | August 2020 | Law and Contemporary Problems

Given that both markets and firms are legal constructs, and that information
costs alone cannot explain when one prevails over the other, what or who
determines when either markets or firms shall reign? The case of Big Tech
suggests that private agents will often prefer hierarchy over markets, because it
greatly increases their control rights and creates economies of scale from which
they can benefit disproportionately, especially when they have free rein to design
the governance structure of these firms. If hierarchy is the “natural” outcome,
proactive intervention is needed to recreate the resemblance of markets in which
parties can bargain at least on formally equal footing.

Excerpt from Rule by Data. Read the full article here.