Chapter 4: Vertical agreements
Firms operating at different levels of the production chain (for example, a supplier of raw materials or components and a manufacturer, a manufacturer and a distributor, or a wholesaler and a retailer) may enter into agreements setting forth the conditions under which the parties may purchase, sell or resell certain goods or services. These agreements, known as vertical agreements, represent an alternative to structural vertical integration: if single ownership is less costly, firms will prefer to extend their activities at different levels, through acquisitions or internal growth; otherwise, they will purchase the goods and services needed to carry out their activities on the market. In the second case, restrictions and obligations may be imposed on the parties to ensure a certain degree of coordination within the production chain.
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