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Entry and Vertical Disintegration

Author

Listed:
  • Alain de Fontenay

    (CITI, Columbia University)

  • Christiaan Hogendorn

    (Economics Department, Wesleyan University)

Abstract

We 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.

Suggested Citation

  • Alain de Fontenay & Christiaan Hogendorn, 2005. "Entry and Vertical Disintegration," Wesleyan Economics Working Papers 2005-010, Wesleyan University, Department of Economics.
    • Handle: RePEc:wes:weswpa:2005-010
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    File URL: http://repec.wesleyan.edu/pdf/chogendorn/2005010_hogendorn.pdf
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    Cited by:

    1. Thomas Hutzschenreuter & Florian Gröne, 2009. "Changing Vertical Integration Strategies under Pressure from Foreign Competition: The Case of US and German Multinationals," Journal of Management Studies, Wiley Blackwell, vol. 46(2), pages 269-307, March.

    More about this item

    Keywords

    entry; vertical integration; specialization;
    All these keywords.

    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

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