Business Commons^™

In the neoclassical model of the firm, value surplus of the firm is assumed to accrue to its owner. Contract model suggests a distribution of the surplus among various agents depending on the imperfections of the markets in which they transact with the firm. If the share of the surplus to an agent declines with the perfection of the market in which he transacts, shareholders should be expected to get only a small piece of the pie, violating the neoclassical assumption. The paper explores an extensive value concept and its measurement for firms. It also examines the implications of extensive …