Question: Long-term contracts with suppliers are preferable to vertical integration when credible commitments can be designed that facilitate cooperation with suppliers. a lack of trust makes

Long-term contracts with suppliers are preferable to vertical integration when

  1. credible commitments can be designed that facilitate cooperation with suppliers.
  2. a lack of trust makes vertical integration hazardous.
  3. the high bureaucratic costs of long-term contracting make the strategy too expensive relative to vertical integration.
  4. an exchange of hostages is not possible
  5. suppliers have substantial bargaining power.

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