OUR goal is to address several issues on the economics of the firm. In particular, we are interested in the survival value of ownership rules in competitive markets for complex services such as law, medicine, and accounting. Are sole proprietorships or partnerships more efficient in the delivery of these services to clients? How do small and large demanders organize their efforts to obtain the best deals in the marketplace? How does competition discipline suppliers to serve these uninformed consumers? In our view, two agency considerations are central to these issues: specifically, the creation of brand name or specific capital' and monitoring.2 In particular, we focus on the U.S. legal service industry, as it provides an interesting institutional framework to explore our questions. Lawyers practice law both in solo and as members of law partnerships of varying sizes. For example, as a percentage of all lawyers in private practice, the number of lawyers practicing in solo in the United States is substantial but has been declining over a recent twenty-year period: in 1960, 64 percent;