Vertical Integration and Market Structure

Timothy F. Bresnahan, Jonathan D. Levin

NBER Working Paper No. 17889
Issued in March 2012
NBER Program(s):   IO   PR   CF

Contractual theories of vertical integration derive firm boundaries as an efficient response to market transaction costs. These theories predict a relationship between underlying features of transactions and observed integration decisions. There has been some progress in testing these predictions, but less progress in quantifying their importance. One difficulty is that empirical applications often must consider firm structure together with industry structure. Research in industrial organization frequently has adopted this perspective, emphasizing how scale and scope economies, and strategic considerations, influence patterns of industry integration. But this research has paid less attention to contractual or organizational details, so that these two major lines of research on vertical integration have proceeded in parallel with only rare intersection. We discuss the value of combining different viewpoints from organizational economics and industrial organization.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17889

Published: “Vertical Integration and Market Structure,”with Timothy Bresnahan, in R. Gibbons and D.J. Roberts, ed. Handbook of Organizational Economics, Princeton University Press, 2012.

Users who downloaded this paper also downloaded these:
Fan, Huang, Morck, and Yeung w14650 Vertical Integration, Institutional Determinants and Impact: Evidence from China
Atalay, Hortacsu, and Syverson w18020 Why Do Firms Own Production Chains?
Acemoglu, Johnson, and Mitton w11424 Determinants of Vertical Integration: Finance, Contracts, and Regulation
Afendulis and Kessler w17316 Vertical Integration and Optimal Reimbursement Policy
Levin w16852 The Economics of Internet Markets
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us