E303lect35F09

E303lect35F09 - November 23, 2009 HW 12 Posted Due...

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November 23, 2009 HW 12 Posted – Due Wednesday Lecture 35 REVIEW___________________________________________________: V. Chapter 6. The Organization of the Firm. Ch. (6.) A. Overview and Motivation B. Optimal Input acquisition 1. Ways to acquire inputs 2. Specialized Investment a. Reasons for. b. Relationship specific exchange Preview__________________________________________________________ B. Optimal Input acquisition (continued) c. Contracting and Transactions Costs 3.Optimal Input procurement 4. Final Comments C. Getting the Most out of Human Inputs Lecture _______ __ ________________________________________________. B. Optimal Input acquisition (continued) d. The Economic Trade-Off. A summary of the relevant decision calculus is illustrated below. Spot Exchange Large spec- ialized invest- ments relative to contracting Yes cost? Complex con- tracting environ- ment relative to cost of vertical integration? No Yes Contract Vertically Integrate. Spot exchange is optimal when there are few “hold-up” opportunities, or where the costs of those opportunities are small relative to contracting costs. When specialized investments become large, contracting or vertical integration is desirable.
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This note was uploaded on 04/12/2010 for the course ECON 303 taught by Professor Shrestha during the Fall '08 term at VCU.

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E303lect35F09 - November 23, 2009 HW 12 Posted Due...

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