Long$-$term contracts:

$q,$

achieve the same outcomes as vertical integration, but they incur higher bureaucratic costs.

are preferable to vertical integration when it is not feasible to exchange hostages.

are preferable to short$-$term contracts when there is a minimal need for cooperation.

are a low$-$cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers. $q,$

$$ generally result in lower prices than competitive bidding.