General Motors & Fisher Body: To hold up or not to hold up
The General Motors – Fisher Body case has its firm place in the handbook of academics from disciplines such as economics, sociology and law.
Yet, the sheer perfection in how this incident confirms the established theories of vertical integration, contract enforcement etc. motivates to give it one’s full attention again. In this essay, I critically evaluate the details of the GM - FB case on the basis of preceding scientific publications.
After the careful consideration, I present the following thesis:
“The FB – GM case is attributed with the impossibility of the assignment of one single scientific theory to explain it. In order to fully understand the intent for hold ups of both transactors, a combination of theory-based assumptions, such as the transaction cost approach, and non-scientific factors, such as the relationship of the transactors and the historical circumstances, has to be employed.”
In order to further explain my thesis, I shall focus on Ronald Coase’s and Benjamin Klein’s publications on the GM – FB case, two of the most discussed papers of modern economics.
In 1998, Benjamin Klein attempts to expound the GM – FB incident in a highly convincing manner. …show more content…
While Klein blames the final vertical integration of FB on the initial increase of demand for closed metal bodies, the following intent for a hold up and the relocation of FB’s plant, Coase fully places the responsibility on GM’ primary intent of ensuring a steady supply and the acquisition of FB’s extensive industrial knowledge (Coase, 2006). As Guerra-Pujol comprehensively summarizes, FB was seen as the “archetypical opportunistic supplier” by Klein while Coase could not identify any opportunistic behaviour whatsoever, adding that risk is generally no reason for the existence of vertical integration (Guerra-Pujol, 2011, p. 33) (Coase,
The General Motors – Fisher Body case has its firm place in the handbook of academics from disciplines such as economics, sociology and law.
Yet, the sheer perfection in how this incident confirms the established theories of vertical integration, contract enforcement etc. motivates to give it one’s full attention again. In this essay, I critically evaluate the details of the GM - FB case on the basis of preceding scientific publications.
After the careful consideration, I present the following thesis:
“The FB – GM case is attributed with the impossibility of the assignment of one single scientific theory to explain it. In order to fully understand the intent for hold ups of both transactors, a combination of theory-based assumptions, such as the transaction cost approach, and non-scientific factors, such as the relationship of the transactors and the historical circumstances, has to be employed.”
In order to further explain my thesis, I shall focus on Ronald Coase’s and Benjamin Klein’s publications on the GM – FB case, two of the most discussed papers of modern economics.
In 1998, Benjamin Klein attempts to expound the GM – FB incident in a highly convincing manner. …show more content…
While Klein blames the final vertical integration of FB on the initial increase of demand for closed metal bodies, the following intent for a hold up and the relocation of FB’s plant, Coase fully places the responsibility on GM’ primary intent of ensuring a steady supply and the acquisition of FB’s extensive industrial knowledge (Coase, 2006). As Guerra-Pujol comprehensively summarizes, FB was seen as the “archetypical opportunistic supplier” by Klein while Coase could not identify any opportunistic behaviour whatsoever, adding that risk is generally no reason for the existence of vertical integration (Guerra-Pujol, 2011, p. 33) (Coase,