Therefore, there are gains from trade. But because the press owner anticipates that, after the specialized investment is made, the publisher may appropriate some or all of the quasi-rents, he or she chooses not to supply the specialized press. Competitive contracting in this case is costly. Vertical integration is costly as well, because of additional costs of managing increased scope of economic activity. Long-term contracts are another option.
Brand name serves as collateral.
Sometimes certain long-term contracts create new hold up problems, as we shall see. This may make it worthwhile to construct even more complicated ones. Long-term contract is particularly an option when the asset in question is human capital , which cannot be owned by firms. Vertical integration is not an option. Difficult to elicit firm-specific human capital because of contracting costs.