Why vertically integrate?

Lest ye think that I am not a fan of vertical integration, given how firm I am in my arguments for the dis-integration of the vertically-integrated, regulated electric utility, I recommend this post from Seth Goldin about reasons why firms vertically integrate. In large part it’s a concise summary of Klein, Crawford, & Alchian (1978), one of the seminal papers in transaction cost economics. A good reminder of the extent to which the transactional boundaries of firms depend on the relative cost of pursuing similar transactions in markets, and that all of those costs can change over time and with technological change.

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