The first set of factors leading to close vertical linkages is fairly straightforward-technological interdependence.

Vertical linkages can be used rather than vertical integration.

Thus a second approach is to look at vertical linkages as a way of minimizing transaction costs, or reducing them below market transaction levels.

In later sections, the major theoretical contributions aimed at understanding vertical linkages will be outlined, and subsequently policy implications will be drawn from them.

Prebisch believed that developing countries needed to create local vertical linkages, and they could only succeed by creating industries that used the primary products already being produced domestically.

This model can be extended to compare vertical separation with the complete absence of vertical linkages, through an adaptation of the model of Ordover et al.

Moreover, combinations of factors can conspire to turn vertical effects into horizontal effects, for example the combination of vertical linkages and the necessity for licences at the retail stage (as in the supply of beer).

It is noteworthy that General Motors and Toyota developed quite different responses to the problem exemplified, the former specializing in vertical integration, the latter in vertical linkages well short of that, but both some distance from anonymous market exchange.

Again, there are complex vertical linkages in the industry and, again, there is a block exemption which covers distribution arrangements within the industry, provided they remain within certain parameters (which the European Community's DGIV believe they do not in some respects).

Hobbs, Jill E. and Young, Linda M. "Vertical Linkages in Agri-Food Supply Chains in Canada and the United States", Research and Analysis Directorate, Strategic Policy Branch, Agriculture and Agri-Food Canada, June 2001.