Markets and Hierarchies:

Analysis and Antitrust

Implications
A Study in the Economics of Internal
Organization
Oliver E. Williamson
University of Pennsylvania
THE FREE PRESS
' D A Division of Macmillan Publishing Co., Inc.
NEW YORK
Collier Macmillan Publishers
LONDON
Contents
PREFACE xi
INTRODUCTION XV
CHAPTER 1 TOWARD A NEW INSTITUTIONAL ECONOMICS 1
1. Some Antecedents
2. A Preliminary Statement of the Organizational Failures
Framework
3. Three Illustrations
CHAPTER 2 THE ORGANIZATIONAL FAILURES FRAMEWORK 20
1. Bounded Rationality and Uncertainty/Complexity
2. Opportunism and Small Numbers
3. Information Impactedness
4. Atmosphere
5. Summary Remarks
CHAPTER 3 PEER GROUPS AND SIMPLE HIERARCHIES 41
1. Peer Group Associations
2. Peer Group Limitations
3. Simple Hierarchy
4. Involvement
5. Concluding Remarks
CHAPTER 4 UNDERSTANDING THE EMPLOYMENT RELATION 57
1. Remarks on the Labor Economics Literature
2. Technology: Conventional and Idiosyncratic
Considerations
3. Individualistic Bargaining Models
4. The Efficiency Implications of Internal Labor Market
Structures
5. Concluding Remarks
CHAPTER 5 INTERMEDIATE PRODUCT MARKETS AND VERTICAL
INTEGRATION 82
1. Prior Literature: A Transactional Interpretation .
2. Static Markets
3. Sales Contracts for Component Supply
4. Unified Ownership of Plant and Equipment: Simple
Hierarchy Extended
V111 CONTENTS
5. Complex Hierarchy: The Employment Relation
Extended
6. Forward Integration into Wholesaling
7. Concluding Remarks
CHAPTER 6 VERTICAL INTEGRATION, II: SOME QUALIFICATIONS 106
1. Interfirm Exchange: Some Qualifications
2. Possible or Purported Antisocial Consequences
3. Antitrust Implications
CHAPTER 7 LIMITS OF VERTICAL INTEGRATION AND FIRM SIZE 117
1. Internalizing the Incremental Transaction: Some
Disabilities
2. Size Considerations
3. Incentive Limits of the Employment Relation
4. Concluding Remarks
CHAPTER 8 THE MULTIDIVISIONAL STRUCTURE 132
1. The Unitary Form Enterprise
2. Organizational Innovation: The Multidivisional
Structure
3. Competition in the Capital Market
4. Optimum Divisionalization
5. The "M-form hypothesis" and Concluding Remarks
Appendix: A Classification Scheme
CHAPTER 9 CONGLOMERATE ORGANIZATION 155
1. The Affirmative Emphasis
2. Competition in the Capital Market
3. Public Policy Issues
4. Some Evidence
5. Concluding Remarks
CHAPTER 10 MARKET STRUCTURE IN RELATION TO TECHNICAL
AND ORGANIZATIONAL INNOVATION 176
1. Technical Innovation and Market Structure: The
Conventional Dichotomy
2. Technical Innovation and Market Structure: Refinements
3. Organizational Innovation and Market Structure
4. A Systems Approach
CHAPTER 11 DOMINANT FIRMS AND THE MONOPOLY PROBLEM 208
1. The Current Approach to Unlawful Monopolization
2. A Market Failure Interpretation of Dominance
3. Government Intervention and Market Failure
4. Remedies for Structural Dominance
CONTENTS IX
5. Application to the Structure-Conduct Controversy
6. Dominant Firms and the Organizational Failures
Framework
7. Conclusion
CHAPTER 12 OLIGOPOLY: INTERFIRM VERSUS INTRAFIRM
ORGANIZATION 234
1. Some Antecedents
2. Oligopoly Regarded as a Problem of Contracting
3. The Contracting Approach and Prior Treatments
Contrasted
4. Policy Implications: Dominant Firms versus Oligopolistic
Interdependence
CHAPTER 13 CONCLUSIONS 248
1 Toward a Transactional Paradigm
2. The Organizational Failures Framework and Hierarchy
3. Antitrust Implications
4. Some Directions for Future Research
BIBLIOGRAPHY 264
INDEX 279