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Vertical Integration and Related Variations on a Transaction-Cost Economics Theme

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New Developments in the Analysis of Market Structure

Part of the book series: International Economic Association Series ((volume 77))

Abstract

That vertical integration is to be understood in large measure as a transaction-cost economising outcome has been generally conceded since Ronald Coase advanced the argument in 1937.2 The argument was forcefully restated by Kenneth Arrow as part of his assessment of the market failure literature (1969, p. 48). It was not, however, until 1971 that the underlying mechanics were described (Williamson, 1971). The argument has since been elaborated (Williamson, 1975, 1979; Klein, et al., 1978). Of equal if not greater importance, the same underlying transaction cost reasoning applies broadly — which is to say that vertical integration is a paradigm problem. Such apparently unrelated phenomena as the employment relation, aspects of regulation, vertical market restrictions, and even family organisation3 are variations on a theme.

The writing of this paper was supported by a grant from the National Science Foundation and from Sloan Foundation support to the Transaction Cost Economics Workshop at the University of Pennsylvania. These are gratefully acknowledged. Michael Riordan’s comments were especially helpful.

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Authors and Affiliations

  1. Yale University, USA

    Oliver E. Williamson

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  1. Oliver E. Williamson
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Joseph E. Stiglitz G. Frank Mathewson

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© 1986 International Economic Association

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Williamson, O.E. (1986). Vertical Integration and Related Variations on a Transaction-Cost Economics Theme. In: Stiglitz, J.E., Mathewson, G.F. (eds) New Developments in the Analysis of Market Structure. International Economic Association Series, vol 77. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-18058-5_5

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