Affiliation, Integration, and Information: Ownership Incentives and Industry Structure
AbstractThis paper presents theory and evidence on horizontal industry structure, focusing on situations where plant-level scale economies are small and market power is not an issue. At issue is the question: what makes industries necessarily fragmented? The theoretical model distinguishes between the structure of brands and firms in an industry by examining trade-offs associated with affiliation and integration, and how they are affected by the contracting environment. I show how contractual incompleteness can lead industries to be necessarily fragmented. I also show that improvements in the contracting environment will tend to lead to a greater concentration of brands, but whether they lead industries to be more or less concentrated depends on what becomes contractible. I then discuss the propositions generated by the model through a series of case study examples.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8300.
Date of creation: May 2001
Date of revision:
Publication status: published as Hubbard, Thomas. "Affiliation, Integration, and Information: Ownership Incentives and Industry Structure." Journal of Industrial Economics (June 2004): 201-228.
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Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-06-08 (All new papers)
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