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| Author: | Lyons, B. R. Sekkat, K. |
| Title: | Strategies bargaining and vertical separation |
| Journal: | Journal of Industrial Economics
1991 : SEP, VOL. 39:5, p. 577-593 |
| Index terms: | BARGAINING LABOUR MARKETS SUBCONTRACTS VERTICAL INTEGRATION WAGE DETERMINATION |
| Language: | eng |
| Abstract: | Arguments are presented that vertical separation can be a device to enhance bargaining power. Labour market effects are non-trivial and the entrepreneur must be expected to take them into account when choosing organizational structure. Two significant consequences are that either sub-contracting or vertical integration may be privately preferred, yet socially inefficient, and that there is no straightforward relationship between organizational choice and specific capital intensity. A simple model is developed to illustrate the implications of bargaining for the decision to vertically integrate or subcontract to another firm under separate control. The implications of opportunities wage setting by labour unions are assessed. |
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