Abstract

A new theory to explain the emergence of firms and markets to carry out economic activity was presented in this author’s recent book . In this theory, called the Variability Approach,the multi-person firm emerges to carry out a production program, agreed upon during the preceding market period. This occurs when the participants in the program need to exchange among themselves additional information, additional to the information already exchanged during the preceding market period. The organization that emerges to facilitate the required additional communication and to carry out the production program is called a multi-person firm