Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316353.2 
Year of Publication: 
2026
Series/Report no.: 
Helsinki GSE Discussion Papers No. 36
Version Description: 
Revised January 2026
Publisher: 
Helsinki Graduate School of Economics, Helsinki
Abstract: 
We develop an organizational governance model with a single buyer and endogenous upstream entry. Investments and control rights over assets and actions are immediately contractable; production is contractable after uncertainty resolves. We show the following: Supplier competition eliminates pre-entry bargaining frictions. To minimize postentry bargaining frictions, control rights over assets and actions are always bundled. If entry is sufficiently cheap, there is frictionless post-entry competition, sometimes due to buyer sponsorship. Otherwise, only one supplier enters. There is vertical integration if the asset’s expected profitability is highest in the buyer’s favorite use; if not, the buyer contracts with an autonomous supplier.
Subjects: 
transaction cost
property rights
relationship specificity
organization
bargaining
vertical integration
governance
inefficiency
master supply agreement
managed market
JEL: 
D23
D86
L22
ISBN: 
978-952-7543-35-1
Document Type: 
Working Paper

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2 10419/316353.2 Revised version: January 6, 2026
1 10419/316353 First version: April 1, 2025

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