Vertical integration can reduce transaction costs through all of the following ways except which one?
A)decreasing the incentive for litigation
B)increasing the required areas of managerial expertise
C)decreasing search costs
D)establishing a partnership between the two firms

Question

Quizplus · Accepted Answer

Vertical integration involves owning and controlling different stages of the production and distribution process, which can reduce transaction costs by eliminating the need for market transactions and coordination. A decrease in search costs and the incentive for litigation can also be achieved through vertical integration. However, increasing the required areas of managerial expertise would not reduce transaction costs but rather increase them as more specialized managers and resources will be needed to oversee the various stages of production and distribution. Establishing a partnership between the two firms, on the other hand, is not a form of vertical integration.

Vertical Integration Can Reduce Transaction Costs Through All of the Following