Browse

Vertical Integration for Quality Signaling

Cited 0 time in Web of Science Cited 0 time in Scopus
Authors
La, Meeryung; Park, Jee-Hyeong
Issue Date
2010-10
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.23 No.4, pp. 533-567
Keywords
Foreign direct investmentLong-term contractSignaling gameVertical integration
Abstract
In the presence of consumers’ incomplete information of firms’

ability to produce quality components, we analyze firms’ incentive

to commit to a long-term relationship as a way to convince consumers

about forming a high-type pair. In contrast to the result

of no brand leverage obtained by Choi and Jeon (2007), our analysis

demonstrates that a “brand-named” firm can restore its leverage

by committing to a long-term relationship. To overcome the time

inconsistency problem in a long-term contract, firms may utilize

vertical integration with relation-specific investment. This signaling

motivation for vertical integration is different from the explanations

that currently exist.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/71647
Files in This Item:
Appears in Collections:
College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.23 no.1/4 (2010)
  • mendeley

Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.

Browse