Klein Crawford Alchian (1978) - Vertical Integration Appropriable Rents And The Competitive Contracting Process

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Reference(s)

Klein, Benjamin Robert, G. Crawford, and Armen A. Alchian (1978), "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process", Journal of Law and Economics, Vol. 21, No. 2. (Oct.), pp. 297-326 pdf

@article{klein1978vertical,
  title={Vertical integration, appropriable rents, and the competitive contracting process},
  author={Klein, Benjamin and Crawford, Robert G and Alchian, Armen A},
  journal={Journal of law and economics},
  volume={21},
  number={2},
  pages={297--326},
  year={1978},
  publisher={JSTOR}
}

Abstract

More than forty years have passed since Coase's fundamental insight that transaction, coordination, and contracting costs must be considered ex- plicitly in explaining the extent of vertical integration.' Starting from the truism that profit-maximizing firms will undertake those activities that they find cheaper to administer internally than to purchase in the market, Coase forced economists to begin looking for previously neglected constraints on the trading process that might efficiently lead to an intrafirm rather than an interfirm transaction. This paper attempts to add to this literature by explor- ing one particular cost of using the market system-the possibility of post- contractual opportunistic behavior.