ECN363001 S18 Feb 15(1).pptx - Vertical Boundaries of a Firm ECN 3630-01 1 Agenda The Efficiency Tradeoff Model Tradeoffs between Technical efficiency

ECN363001 S18 Feb 15(1).pptx - Vertical Boundaries of a...

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Vertical Boundaries of a Firm ECN 3630-01 February 15, 2018 1
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Agenda The Efficiency Tradeoff Model - Tradeoffs between Technical efficiency and Agency efficiency Asset ownership and integration Alternatives to Vertical Integration o Tapered integration o Franchising o Strategic Alliances and Joint Ventures o Implicit contracts and long term relationships Applications o Pharmaceutical Industry o Vertical Integration in the Insurance Industry o Franchising in China o Toys “R” Us Enters Japan o The Women’s Dress Industry 2
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Vertical Boundaries For each step in the vertical chain the firm has to decide between market exchange and vertical integration The degree of vertical integration differs o Across industries o Across firms within an industry o Across stages of the vertical chain o Across time 3
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The Tradeoff in Vertical Integration Technical efficiency - least cost production Agency efficiency – agency and influence costs,
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  • Spring '08
  • gai
  • Economics, Agency Efficiency

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