ABSTRACT
Firms serve many purposes in a market economy. Frederic Sautet lists four reasons why economic activity is undertaken within firms: 1 (1) firms exist for technological reasons, because certain types of production processes cannot be separated; (2) they are a manifestation of a certain type of market contract, or are a nexus of contracts; 2 (3) they exist because sometimes it is less costly to bypass markets to allocate resources in a hierarchical manner; 3 and (4) they exist to concentrate the capabilities of economic actors who are more efficient if they work together as a team. 4
