Integration and Information: Markets and Hierarchies Revisited
AbstractWe analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make specific investments at private cost, and there is a machine that either party can own. As in property-rights models, different ownership structures create different incentives for the parties’ investments. As in rational-expectations models, some parties may invest in acquiring information, which is then incorporated into the market-clearing price by the parties’ trading behaviors. The informativeness of the price mechanism affects the returns to specific investments and hence the optimal ownership structure for individual dyads; meanwhile, the ownership choices by individual dyads affect the informativeness of the price mechanism. In equilibrium the informativeness of the price mechanism can induce ex ante homogenous dyads to choose heterogeneous ownership structures.
Download InfoIf 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15779.
Date of creation: Feb 2010
Date of revision:
Note: IO TWP
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Roman Fossati, 2012.
"Outsourcing versus Vertical Integration: A Dynamic Model of Industry Equilibrium,"
Bristol Economics Discussion Papers, Department of Economics, University of Bristol, UK
12/627, Department of Economics, University of Bristol, UK.
- Roman Fossati, 2011. "Outsourcing versus Vertical Integration: A Dynamic Model of Industry Equilibrium," 2011 Meeting Papers, Society for Economic Dynamics 1421, Society for Economic Dynamics.
- Román Fossati, 2012. "Outsourcing versus vertical integration: A dynamic model of industry equilibrium," Working Papers, Instituto MadrileÃ±o de Estudios Avanzados (IMDEA) Ciencias Sociales 2012-07, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.