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- W1844846175 abstract "This paper analyzes the choice between long-term and firms. The basic setup is a two-stage version of a vertical integration problem. In stage one, the upstream and downstream managers, respectively, expend costreducing and revenue-enhancing effort. In the second stage, managers observe private information about upstream costs and downstream revenues, and a quantity decision is made. This paper focuses on the ex ante choice between long-term and firms, before specific investment. The central contribution is to provide a simple, testable theory of the implicit efficiency tradeoffs between long-term and firms. Longterm contracts are defined as arrangements where parties prespecify a nonlinear (transfer) pricing schedule before investment in specific assets. One then sets output, and each manager is compensated out of the residual earnings of the portion of production they manage. Under a firm one of these stages is owned by the other, and the manager of that stage is then" @default.
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- W1844846175 date "1990-01-01" @default.
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- W1844846175 title "The Comparative Advantage of Long-Term Contracts and Firms" @default.
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- W1844846175 doi "https://doi.org/10.1093/oxfordjournals.jleo.a036983" @default.
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