Assignment 2.

In their much-cited 1978 article, Klein, Crawford, and Alchian famously use the example of General Motors's acquisition of Fisher Body in support of their claim that the specificity of assets in a transaction is a major cause of vertical integration. That historical example eventually generated a cottage industry of revision and re-revision. Fairly recently, Benjamin Klein (2007) produced yet another paper on the issue, apparently responding to critics notable among whom was a nonogenarian Coase (2006).

I originally learned of Klein's paper because a journal editor sent it to me to referee. Before I had a chance to read the paper let alone write a referee report, the editor wrote back to say that the paper had been withdrawn and would be published elsewhere. Your assignment is to provide the report I never got to write. Summarize the argument of the new paper and place it in the context of the debate over Fisher Body. What is new in this paper? How successful is its argument against the critics? Has Klein modified his original position?

• Klein, Benjamin, Robert G. Crawford and Armen A. Alchian. 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics 21(2): 297-326.
• Coase, Ronald H. 2006. "The Conduct of Economics: The Example of Fisher Body and General Motors," Journal of Economics and Management Strategy 15(2): 255-78.
• Klein, Benjamin. 2007. "The Economic Lessons of Fisher Body–General Motors," International Journal of the Economics of Business 14(1): 1-36

Due: February 16.