Vertical Integration, Appropriable Rents, and the Competitive Contracting Process.¶
Klein, B., Crawford, R. G., & Alchian, A. A. (1978). Vertical Integration, Appropriable Rents, and the Competitive Contracting Process. Journal of Law and Economics, 21(2), 297-326.
Cited by¶
3 citations across 3 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Incomplete Contract
- The discretion-abuse failure mode the prime names appears precisely as hold-up: the residual-rights holder can, ex post, threaten to withhold cooperation to extract the other party's specific investment, which distorts ex-ante investment incentives.
This sourceThe hold-up problem — the residual-rights holder threatening to withhold cooperation ex post to expropriate specific investment, distorting ex-ante incentives.
- The discretion-abuse failure mode the prime names appears precisely as hold-up: the residual-rights holder can, ex post, threaten to withhold cooperation to extract the other party's specific investment, which distorts ex-ante investment incentives.
- Relationship Specific Investment
- Put numbers on it: the tooling cost the supplier $10M and, used to make this automaker's part, generates output the supplier can sell for, say, $12M over the contract — an inside-relationship value of $12M.
This sourceFormalizes appropriable quasi-rents from specific assets and the hold-up problem, using the customized-asset (Fisher Body/GM) case.
- Put numbers on it: the tooling cost the supplier $10M and, used to make this automaker's part, generates output the supplier can sell for, say, $12M over the contract — an inside-relationship value of $12M.
- Transaction Costs
Verification¶
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