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Incomplete Contracts and Industrial Organization: A Survey

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Author Info

  • Andrew F. Newman

    ()
    (Department of Economics, Boston University)

  • Patrick Legros

    ()
    (Universit´e libre de Bruxelles, ECARES)

Abstract

While most researchers in industrial organization agree that the neoclassical, cost-minimizing, unitary, view of the firm is restrictive, it is still the main object of anlysis in the literature. We review the literature in industrial organization and the place occupied by a richer view of the firm both before and after Grossman & Hart (1986) (GH). Before GH, integration was viewed as a way to alleviate hold-up problems, agency or market power distorsions; GH pointed out that integration and ownership reallocation create their own incentive problems. We show how this insight can enrich the usual analysis of firms with market power but also opens the door for a rich set of questions in more competitive environments.

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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-036.

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Length: 48 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bos:wpaper:wp2011-036

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Postal: 270 Bay State Road, Boston, MA 02215
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Web page: http://www.bu.edu/econ/
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References

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  1. Enghin Atalay & Ali Hortacsu & Chad Syverson, 2012. "Why Do Firms Own Production Chains?," NBER Working Papers 18020, National Bureau of Economic Research, Inc.
  2. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
  3. Legros, Patrick & Newman, Andrew, 2002. "Assortative Matching in a Non-transferable World," CEPR Discussion Papers 3469, C.E.P.R. Discussion Papers.
  4. Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September.
  5. Luis C. Corchon, 2006. "Welfare losses under cournot competition," Economics Working Papers we063910, Universidad Carlos III, Departamento de Economía.
  6. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
  7. Patrick Legros & Andrew F. Newman & Eugenio Proto, 2007. "Smithian Growth through Creative Organization," Boston University - Department of Economics - Working Papers Series WP2007-002, Boston University - Department of Economics.
  8. Patrick Legros & Andrew F. Newman, 2004. "Competing for Ownership," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-148, Boston University - Department of Economics.
  9. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "Centralization versus Decentralization: An Application to Price Setting by a Multi-market Firm," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 457-467, 04-05.
  10. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  11. Patrick Legros & Andrew F. Newman, 2013. "A Price Theory of Vertical and Lateral Integration," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 725-770.
  12. Armin Schmutzler, 2007. "The relation between competition and innovation – Why is it such a mess?," SOI - Working Papers 0716, Socioeconomic Institute - University of Zurich, revised Jan 2010.
  13. Patrick Legros & Andrew Newman, 1996. "Wealth effects, distribution, and the theory of organization," ULB Institutional Repository 2013/7036, ULB -- Universite Libre de Bruxelles.
  14. Kosfeld, Michael & von Siemens, Ferdinand, 2007. "Competition, Cooperation, and Corporate Culture," IZA Discussion Papers 2927, Institute for the Study of Labor (IZA).
  15. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
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  17. Povel, Paul & Raith, Michael, 2004. "Financial constraints and product market competition: ex ante vs. ex post incentives," International Journal of Industrial Organization, Elsevier, vol. 22(7), pages 917-949, September.
  18. Legros, Patrick & Newman, Andrew, 2000. "Monotone Matching In Perfect And Imperfect Worlds," CEPR Discussion Papers 2396, C.E.P.R. Discussion Papers.
  19. Patrick Bolton & Marco Becht & Alisa Röell, 2002. "Corporate Governance and Control," NBER Working Papers 9371, National Bureau of Economic Research, Inc.
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  21. repec:ind:iispdp:11-02 is not listed on IDEAS
  22. Schmitz, Patrick & Dirk Sliwka, 1999. "On Synergies and Vertical Integration," Discussion Paper Serie A 602, University of Bonn, Germany.
  23. Serfes, Konstantinos, 2005. "Risk sharing vs. incentives: Contract design under two-sided heterogeneity," Economics Letters, Elsevier, vol. 88(3), pages 343-349, September.
  24. Holmström, Bengt, 2013. "Inside and Outside Liquidity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518536, December.
  25. Elisabetta Iossa & David Martimort, 2008. "The Simple Micro-Economics of Public-Private Partnerships," The Centre for Market and Public Organisation 08/199, Department of Economics, University of Bristol, UK.
  26. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Centre de Recherche en Economie et Statistique.
  27. Mathias Dewatripont & Patrick Legros, 2013. "'Essential' patents, FRAND royalties and technological standards," ULB Institutional Repository 2013/168609, ULB -- Universite Libre de Bruxelles.
  28. Steven Tadelis, 2002. "Complexity, Flexibility, and the Make-or-Buy Decision," American Economic Review, American Economic Association, vol. 92(2), pages 433-437, May.
  29. Robert Gibbons & Richard Holden & Michael Powell, 2012. "Organization and Information: Firms' Governance Choices in Rational-Expectations Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 127(4), pages 1813-1841.
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  31. Schmidt, Klaus M., 1997. "Managerial Incentives and Product Market Competition," Munich Reprints in Economics 19772, University of Munich, Department of Economics.
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  33. Dickson, V. A. & Yu, Weiqiu, 1989. "Welfare losses in Canadian manufacturing under alternative oligopoly regimes," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 257-267, June.
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Cited by:
  1. Nicola Meccheri & Luciano Fanti, 2012. "Informal incentive labour contracts and product market competition," Discussion Papers 2012/139, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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