Competition, Contract, and Vertical Integration

Abstract

Vertical integration, the coordination of successive stages of production or distribution, has received considerable attention in recent years. This attention, however, has been confined largely to integration by stock or asset acquisition--ownership integration. Contract integration-vertical contractual arrangements such as requirement, output, exclusive dealing, franchise, consignment, and agency agreements--has just begun to be treated as a form of vertical integration although it is widely used to achieve industrial coordinat tion and even control. Nor have informal understandings which are ancillary to formal contracts and which aim at coordination been included in an overall concept of integration.