Advanced Search
MyIDEAS: Login

The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration

Contents:

Author Info

  • Grossman, Sanford J.
  • Hart, Oliver D.

Abstract

Our theory of costly contracts emphasizes that contractual rights can be of two types: specific rights and residual rights. When it is costly to list all specific rights over assets in the contract, it may be optimal to let one party purchase all residual rights. Ownership is the purchase of these residual rights. When residual rights are purchased by one party, they are lost by a second party, and this inevitably creates distortions. Firm 1 purchases firm 2 when firm 1's control increases the productivity of its management more than the loss of control decreases the productivity of firm 2's management.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://dash.harvard.edu/bitstream/handle/1/3450060/Hart_CostsBenefits.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3450060.

as in new window
Length:
Date of creation: 1986
Date of revision:
Publication status: Published in Journal of Political Economy -Chicago-
Handle: RePEc:hrv:faseco:3450060

Contact details of provider:
Postal: Littauer Center, Cambridge, MA 02138
Phone: 617-495-2144
Fax: 617-495-7730
Web page: http://www.economics.harvard.edu/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kenneth J. Arrow, 1975. "Vertical Integration and Communication," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 173-183, Spring.
  2. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  3. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
  4. Waldman, Michael, 1984. "Worker Allocation, Hierarchies and the Wage Distribution," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 95-109, January.
  5. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
  6. Michael Keren & David Levhari, 1983. "The Internal Organization of the Firm and the Shape of Average Costs," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 474-486, Autumn.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Харт, Оливер in Wikipedia Russian ne '')
  2. Гроссман, Сэнфорд in Wikipedia Russian ne '')

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hrv:faseco:3450060. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ben Steinberg).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.