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United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?

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Author Info
Mullin, Joseph C
Mullin, Wallace P
Abstract

This article examines United States Steel Corporation's acquisition by long-term lease of the iron ore properties of the Great Northern Railway. This 1906 transaction, which significantly increased U.S. Steel's already substantial ore holdings, has been characterized by contemporary observers and modern economists as an example of vertical foreclosure. We present qualitative and quantitative evidence to support an alternative view that the lease generated a net efficiency gain as it promoted relationship-specific investment in the exploitation of the ore properties. Copyright 1997 by Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal Journal of Law, Economics and Organization.

Volume (Year): 13 (1997)
Issue (Month): 1 (April)
Pages: 74-100
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Handle: RePEc:oup:jleorg:v:13:y:1997:i:1:p:74-100

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  1. Michael H. Riordan, 2005. "Competitive effects of vertical integration," Discussion Papers 0506-11, Columbia University, Department of Economics. [Downloadable!]
  2. Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure, a policy framework," CPB Documents 157, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  3. Tasneem Chipty, 2001. "Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry," American Economic Review, American Economic Association, vol. 91(3), pages 428-453, June. [Downloadable!] (restricted)
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