Strategic bargaining and vertical separation
AbstractCurrent theories of the vertical limits to firm size emphasize the consequences of opportunistic behavior by managers. The authors introduce opportunistic wage setting by labor unions and trace the implications for profit and investment in specific assets. Although subcontracting to an independent supplier leaves the entrepreneur with a reduced share of the surplus, he is able to pass on the responsibility for making certain investments. Two significant results are that either subcontracting or vertical integration may be privately preferred yet socially inefficient; and there is no straightforward relationship between organizational choice and specific capital intensity. Copyright 1991 by Blackwell Publishing Ltd.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/7322.
Date of creation: Sep 1991
Date of revision:
Publication status: Published in: The Journal of Industrial Economics (1991) v.39 n° 5,p.577-595
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