Value Creation, Transactions and the Firm

Abstract

Going from supply and demand analysis to value creation can be puzzling. The paper defines a simple transaction model representing value creation with and without the intermediation of a firm, measuring transaction price indetermination, and defining conditions for a transaction to occur. Using Debreu’s classification of “The theory of value”, an analogy pictures the role of the firm. In the theory of knowledge, it is one of the four dimensions of a definition of an object. These dimensions are discussed, particularly the functions of the firm and its components, what it is made of.