Entry and Vertical Disintegration
AbstractWe formalize and extend George Stigler’s famous article “The division of labor is limited by the extent of the market.” We emphasize economies of scale in intermediate goods production as a determinant of firm boundaries and vertical control. We show that there are potential coordination failures which may prevent efficient vertical disintegration, and we discuss how these might be either overcome or used to the advantage of incumbent firms.
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Bibliographic InfoPaper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2005-010.
Length: 17 pages
Date of creation: Dec 2005
Date of revision:
entry; vertical integration; specialization;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-04 (All new papers)
- NEP-BEC-2006-12-04 (Business Economics)
- NEP-COM-2006-12-04 (Industrial Competition)
- NEP-IND-2006-12-04 (Industrial Organization)
- NEP-MIC-2006-12-04 (Microeconomics)
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