The paper is concerned with economies in which agents find sellers and employers in a time-consuming search process while they simultaneously trade with their current partners. A symmetric steady-state equilibrium does not exist, but asymmetric steady-state equilibria exist and are such that larger firms offer higher wages and charge lower prices than smaller firms, but still make more profits. These profits can be seen as rents from a superior market position.

The paper is concerned with economies in which agents find sellers and employers in a time-consuming search process while they simultaneously trade with their current partners. A symmetric steady-state equilibrium does not exist, but asymmetric steady-state equilibria exist and are such that larger firms offer higher wages and charge lower prices than smaller firms, but still make more profits. These profits can be seen as rents from a superior market position.

Using Tobin's q as a measure of performance, we seek to estimate the relative importance of industry, focus, and share effects in determining firm performance. Our methods are analogous to those of Richard Schmalensee and, like him, we find that industry effects account for the majority of the explained variance. However, we also find that firm effects exist in the form of focus effects, that is, narrowly diversified firms do better than widely diversified firms. We interpret this finding as consistent with profit maximization by firms with different factor endowments.

Using Tobin's q as a measure of performance, we seek to estimate the relative importance of industry, focus, and share effects in determining firm performance. Our methods are analogous to those of Richard Schmalensee and, like him, we find that industry effects account for the majority of the explained variance. However, we also find that firm effects exist in the form of focus effects, that is, narrowly diversified firms do better than widely diversified firms. We interpret this finding as consistent with profit maximization by firms with different factor endowments.

We use a data set describing ownership of productive assets in the carpentry trade to evaluate several factors influencing the allocation of asset ownership between an employer and his employees. The findings suggest that the allocation involves a tradeoff between two incentive effects influencing how the employee uses the asset and what the employer decides it should be used for. In particular, the allocation of ownership hinges on whether an asset is easily lost or stolen, which favors employee ownership, and whether the employer's task assignment affects the asset's depreciation, which favors employer ownership. There is also evidence that more expensive assets and assets that are shared by more than one employee are more likely to be owned by the employer. The results suggest that a general theory of asset ownership should be able to take account of at least these effects.