Question

Some firms have engaged in backward vertical integration strategies in order to appropriate the economic profits that would have been earned by suppliers selling to them. How is this motivation for backward vertical integration related to the opportunism logic for vertical integration? Compare the competitive conditions under which firms will be motivated to avoid opportunism through vertical integration. Please give examples and elaborate on your answers.

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Answer 1

Answer-

Take the instance of AN automaker World Health Organization is by and by sourcing, state, back view mirrors from an out of entryways supplier. It's obvious to the maker that the mirror supplier is making amazing benefits during these dealings.

Presently, suppose that the producer is making a fresh out of the plastic new kind of vehicle that needs a significantly new kind of mirror. The mirror maker ought to make a significant exchange explicit speculation for this arrangement. The automaker is probably not going to encourage the mirror maker to frame the speculation for stress of shark behavior by the automaker.

The automaker will as of now avoid convenience and increment its benefits by vertically bunch activity into making its own mirrors. In any case, the contrary clarifications for combination (abilities and adaptability) ought to try and be factored into this call.

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