In order to survive as a social institution a firm needs a constitutional social contract, even though implicit, among its stakeholders. This social contract must exist if an institution is to be justified. The book focuses on two main issues: To find out the terms of the hypothetical agreement among the firm's stakeholders in an ex ante perspective and to understand the endogenous mechanism generating appropriate incentives that induce to comply with the social contract itself, as seen in the ex post perspective.

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Preface.- Acknowledgements.- 1. An Overview of the Theory: Hierarchies, Social Contract and Reputation: Introduction; The Firm as Hierarchy; Abuse of Authority; Codes of Ethics; The Constitutional Contract of the Firm; A Parameter for Reputation Effects; Code of Ethics, Rationality and 'Fuzzy Reputation'.- 2.Economic Theory and the Social Contract of the Firm: Theory of Property Rights and Control on the Firm; Constitutional Contract of the Firm and the Theory of Justice; Economic Constitution, Ownership, Compensation.- 3. Games of Reputation and Compliance with the Social Contract: The Compliance Problem; Approaches to the Compliance Problem; Strategic Rationality and Endogenous Sanction of Contractual Commitments; Eyplicitly Modelled Reputation Effects; The Repeated Game between One Long-run Player... and an Infinite Series of Short-run Players; Foundational Problems.- 4. How Far Does Reputation Extend? Abuse of Authority and Corporate Culture: Contexts of Transaction and the Scope of 'Reputation'; Reputation and Hierarchical Transactions; Unforeseen Contingencies; Corporate Culture as a Basis for Reputation Effects; Corporate Culture and 'Focal Points'. A Critical Examination; Explicit General Rules VS. Contextual Focal Points; Moral Language; 5. Information, Incomplete Contracts and the Ethical Code; Default Rules and Contracts; Default Rules and Corporate Ethical Code; Default Rules and Contracts; Default Rules and Corporate Ethical Code; Complete and Incomplete Contracts and Information; The Logic of Incomplete Knowledge and Limited Reasoning; Explicit Contracts, Implicit Rules and Ethical Code; Vagueness VS. Precision; 6. Dealing with Vagueness of Norms: the Theory of Fuzzy Sets: Introduction; Definition of Elementary Fuzzy Concepts; Fuzzy Sets and Possibility; Unforeseen Contingencies and Vagueness; Moral Code and Vagueness; Limitations of this Way of Dealing with Vagueness; 7. A Game Theoretic Model of Incomplete Contract and Ethical Code: The Hierarchical Transaction as a Game; - A Hierarchical Transaction; - The Game in Extended Form: the Moves of Player A; - The Moves of Nature; - The Moves of Player B; - Payoffs in the Case of Foreseeable States; The game in the Presence of Unforeseen Events and Vague Knowledge; Incomplete Contract and Ethical Code; ' Mute' Contractual Rules VS. 'Vague' Moral Principles; 8. Ethical Decision-making Procedure: Vagueness, Default Reasoning and Reputation: Vagueness and Application of the Constitutional Principle (the First Step in the Ethical Procedure); The Second Step in the Ethical Procedure: Fuzzy Measures of Surplus and Effort; Vagueness of Efficient/Fair Outcomes: the Third Step in the Ethical Procedure; Default Deduction of Admissible Actions (the Fourth Step in the Ethical Procedure); Back to Reputation Effects; Reputation in Unforeseen States of the World; Limitations and Final Remarks; References.- Names Index.-