WHO BENEFITS FROM CORRODING KEIRETSU?

Tohru Wako and Hiroshi Ohta ()

Pacific Economic Review, 2005, vol. 10, issue 4, 539-556

Abstract: Abstract. Observations on Japan's industrial distribution system reveal that many producers maintain both keiretsu and non‐keiretsu channels. An intriguing question then is: what economic rationale underlies such an ambivalent policy? This motivated us to present a model of an incomplete keiretsu system. We find that the collapse of a keiretsu is not necessarily a misfortune for the firms remaining therein: they can turn the situation to their advantage if a keiretsu collapses partially. We show why some firms leave their keiretsu while others remain with it, and determine who the winners are.

Date: 2005
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