@book{cc7128c9d44f4cc689a9d92880cfe98e,
title = "Markets, Contracts and Hierarchies: How Bargaining Frictions Affect Governance",
abstract = "We develop an organizational governance model with a single buyer and endogenous upstream entry. Investments and control rights over assets and actions are immediately contractable; production is contractable after uncertainty resolves. We show the following: Supplier competition eliminates pre-entry bargaining frictions. To minimize post-entry bargaining frictions, control rights over assets and actions are always bundled. If entry is sufficiently cheap, there is frictionless post-entry competition, sometimes due to buyer sponsorship. Otherwise, only one supplier enters. There is vertical integration if the asset{\textquoteright}s expected profitability is highest in the buyer{\textquoteright}s favorite use; if not, the buyer contracts with an autonomous supplier.",
keywords = "511 Economics, transaction cost, property right, relationship specificity, organization, bargaining, vertical integration, governance, inefficiency, master supply agreement, managed market",
author = "Tore Ellingsen and Topi Miettinen",
year = "2026",
language = "English",
series = "Helsinki GSE Discussion Papers",
publisher = "Helsinki Graduate School of Economics",
number = "36",
edition = "Revised",
}