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Affiliation, integration, and information: ownership incentives and industry structure

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  • Thomas N. Hubbard

Abstract

This paper presents theory and evidence on horizontal industry structure. At issue is the question: what makes industries necessarily fragmented? The theoretical model examines trade‐offs associated with affiliation and integration, and how they are affected by the contracting environment. I show how contractual incompleteness can lead industries to be necessarily fragmented. I also show that contractual improvements will tend to lead to a greater concentration of brands, but whether they lead industries to be more or less concentrated depends on what becomes contractible. I then discuss the propositions generated by the model through a series of case study examples.

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  • Thomas N. Hubbard, 2004. "Affiliation, integration, and information: ownership incentives and industry structure," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 201-227, June.
    • Handle: RePEc:bla:jindec:v:52:y:2004:i:2:p:201-227
    DOI: 10.1111/j.0022-1821.2004.00223.x
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    5. George Baker & Thomas N. Hubbard, 2001. "Empirical Strategies in Contract Economics: Information and the Boundary of the Firm," American Economic Review, American Economic Association, vol. 91(2), pages 189-194, May.
    6. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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    Cited by:

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