Abstract
Transactions between entities engaging in successive stages of production often take place outside the spot market. Some producers employ forward contracts to tie down price or quantity; others rely on some form of principal-agent arrangement; still others enter into joint stock ownership or even integrate vertically, thus, placing decision making in the hands of a single authority. These arrangements represent, in varying degrees, the producers’ attempts to bypass the market. In a market-oriented economy, such practices require careful explanation. The purpose of this paper is to study how market uncertainties motivate these arrangements and to explain why one of these arrangements or a combination of them is chosen under a given set of market conditions.
The authors wish to thank Professors David Baron, Roger Sherman and Charles Holt for their helpful comments on an early draft of this paper.
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© 1989 Springer-Verlag New York Inc.
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Horen, J., Wu, S.Y. (1989). Vertical Transactions under Uncertainty. In: Fomby, T.B., Seo, T.K. (eds) Studies in the Economics of Uncertainty. Springer, New York, NY. https://doi.org/10.1007/978-1-4613-8922-4_9
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DOI: https://doi.org/10.1007/978-1-4613-8922-4_9
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