Book Review: Vertical Control of Markets: Business and Labor Practices

• Author: Roger Sherman
• Date: 01 March 1980
• DOI: 10.1177/0003603X8002500109
• Published date: 01 March 1980
• Subject Matter: Book Reviews

The Antitrust Bulletin/Spring 1980 269

Vertical Control

of

Markets: Business

and

Labor Practices

Frederick R. Warren-Boulton

Cambridge, Mass.: Ballinger Publishing Co. (1978), xv +213 pp.

Reviewed by Roger Sherman Department

of

Economics, University

of

Virginia, Charlottesville, Va.

For many years economists almost ignored vertical integration.

No motive for vertical integration of firms was thought undesir-

able, except where anticompetitive effects were so extreme they

required no complicated analysis, as when a film producer ac-

quired almost all theaters or a refiner "cornered the market"

for its raw material. Gradually through the 1970's, however,

potential distortions were uncovered due to market power, and

problems were seen in contracting and in the assurance

of

sup-

plies under imperfect information and risk. These discoveries,

and on occasion rediscoveries, have brought a welcome addition

of

theoretical and empirical works on vertical integration. Fred-

erick Warren-Boulton summarizes much

of

this work and con-

tributes significantly to it as well.

Vertical control first is broadly defined by Warren-Boulton,

so a range of means can be analyzed for achieving it, such as

tying, exclusive dealing, full-line forcing, royalty and profit-

sharing arrangements, resale price setting and even labor work

rules, plus vertical integration. Incentives for vertical control are

divided into three categories: (1) those present in competitive

conditions, (2) those due to government action, and (3) those

that follow from horizontal market power.

Chapter 2 treats cases that fall in the first, competitive,

category.

It

covers incentives for vertical control caused by tech-

nological economics, externalities, various informational in-

fluences, sheer desire for control over events, and risk aversion.

Of

these the newest and most interesting are the arguments

, 1980by Federal Legal Publication'. Inc.