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Title Vertical integration, appropriable rents, and the competitive contracting process
Creator/Author Klein, B. (Univ. of California, Los Angeles) ; Crawford, R.G. ; Alchian, A.A.
Publication Date1978 Oct 01
OSTI IdentifierOSTI ID: 6411516
Other Number(s)CODEN: JLLEA
Resource TypeJournal Article
Resource RelationJ. Law Econ. ; Vol/Issue: 21:2
Subject290200 -- Energy Planning & Policy-- Economics & Sociology; ;VERTICAL INTEGRATION-- ECONOMIC ANALYSIS; BEHAVIOR;COMPARATIVE EVALUATIONS;COMPETITION;CONTRACTS;COST;LEASING;MARKET;OWNERSHIP;RISK ASSESSMENT
Related SubjectECONOMICS
Description/Abstract The potential of post-contractural apportunistic behavior for improving market efficiency through intrafirm rather than interfirm transactions is examined under the assumption that vertical costs will increase less than contracting costs as specialized assets and appropriable quasi rents increase.^Vertical integration protects against the risk of contract cancellation and can create market power which is not generally referred to as monopoly.^Contracts used as a alternative provide economically enforceable protection against opportunistic behavior.^Solutions to opportunistic behavior problems can include joint ownership of common assets and condominium ownership of services.^Economies of scale are major factors in some businesses, such as insurance.^The complexities of ownership relations makes it difficult to assign higher costs to either the contract or vertical-integration approach.^This suggests that economic analysis should be used to identify which is most advantageous for specific kinds of activities.
Country of PublicationUnited States
LanguageEnglish
FormatPages: 297-326
System Entry Date2001 May 13

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