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Strategic bargaining and vertical separation

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Author Info

  • Bruce R. Lyons
  • Khalid Sekkat

Abstract

Current 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 Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/7322.

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Date of creation: Sep 1991
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Publication status: Published in: The Journal of Industrial Economics (1991) v.39 n° 5,p.577-595
Handle: RePEc:ulb:ulbeco:2013/7322

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Cited by:
  1. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2005. "Can deunionization lead to international outsourcing?," Working Papers in Economics 15/05, University of Bergen, Department of Economics.
  2. Maria Bas & Juan Carluccio, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
  3. Maria Bas & Juan Carluccio, 2009. "Wage Bargaining and the Boundaries of the Multinational Firm," CEP Discussion Papers dp0963, Centre for Economic Performance, LSE.
  4. Gonzalez, Manuel & Arrunada, Benito & Fernandez, Alberto, 1998. "Regulation as a cause of firm fragmentation:the case of the Spanish construction industry," International Review of Law and Economics, Elsevier, vol. 18(4), pages 433-450, December.

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