This paper analyzes the effects of international openness on vertical integration decisions. A simple model is presented to represent the asset specificity problem at the heart of many industrial organization economists' analysis of vertical integration.

A simple model of indirect taxation, evasion, and enforcement is presentedin which some surprising results emerge. Because of a 'market- thinning' effect of high prices, high taxes lead to multiple equilibria (low-price black markets and high-price legal markets), and black- market comparative...