9-18-09 - Economics 448 Class Notes 9/18/09 Check his...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 448 – Class Notes – 9/18/09 Check his website for new sample exams The exam will include multiple choice/objective and essay questions Bell Journal of Economics Bell Labs: * They are trying to find reasons for why big firms are good. Klein, Crawford, and Alchian, “Vertical Integration, Appropriable Rents, and the Competitive Contracting Process” * Asking question: When is vertical integration an important part of the production process? o Vertical Integration – Integrate tasks you already doing When you are looking at different steps in the production process Example: Making pants Cotton firms Spinning Weaving Cutting Dying o Integrate all tasks or components in the production process to accomplish your goal (producing the product, pants) o Every step in the production o Moving up and down the production process (same output) o Horizontal Integration – Acquiring a company that does something similar Buying a firm in the same sector or segment of the market Horizontal in production process moving into similar, but different production processes (different outputs) The cost of using the market place at different stages of the production process might be really high Transaction cost explanation for why there is vertical integration If there are high transaction costs may lead to bigger firms
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
IDEA OF RENT When do firms shut down (in the long run)? Shut down in long run when the price falls below the Average Total Cost (ATC)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

9-18-09 - Economics 448 Class Notes 9/18/09 Check his...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online