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Incomplete Contracts and Industrial Organization: A Survey

  • Andrew F. Newman

    ()

    (Department of Economics, Boston University)

  • Patrick Legros

    ()

    (Universit´e libre de Bruxelles, ECARES)

While most researchers in industrial organization agree that the neoclassical, cost-minimizing, unitary, view of the firm is restrictive, it is still the main object of anlysis in the literature. We review the literature in industrial organization and the place occupied by a richer view of the firm both before and after Grossman & Hart (1986) (GH). Before GH, integration was viewed as a way to alleviate hold-up problems, agency or market power distorsions; GH pointed out that integration and ownership reallocation create their own incentive problems. We show how this insight can enrich the usual analysis of firms with market power but also opens the door for a rich set of questions in more competitive environments.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-036.

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Length: 48 pages
Date of creation: Jan 2011
Handle: RePEc:bos:wpaper:wp2011-036
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Web page: http://www.bu.edu/econ/

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