Vertical Integration, Appropriable Rents, and the Competitive Contracting Process

  title={Vertical Integration, Appropriable Rents, and the Competitive Contracting Process},
  author={Benjamin Klein and Robert Gunn Crawford and Armen Albert Alchian},
  journal={The Journal of Law and Economics},
  pages={297 - 326}
The potential of post-contractural apportunistic behavior for improving market efficiency through intrafirm rather than interfirm transactions is examined under the assumption that vertical costs will increase less than contracting costs as specialized assets and appropriable quasi rents increase. Vertical integration protects against the risk of contract cancellation and can create market power which is not generally referred to as monopoly. Contracts used as a alternative provide economically… 
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