Page 19 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 1, 2014, pp. 4-25

whether requirements of the contract have been met. Sometimes it is difficult to form terms and

conditions of the contract under changing circumstances, e.g. in a time of unprecedented demand

or unexpected technological progresses [Gellhorm, Ernest and William E.Kovacic 1994]. If the

contractual law of the country is not developed in an appropriate way, enforcement of contracts

may be more expensive or indefinite than in countries where the contractual law is developed.

Therefore, bringing the funds together would be more expedient rather than fragmenting the

funds and establishing mutual relations among them in countries of the first type.

Two unique advantages to the integration may not be ignored when addressing issues of

demonopolization. These include ease of coordination activities of funds where the cost of

“refusals” related to the elimination of “barriers” and coordination of funds operations is too high.

When an enterprise makes major capital investments intended for private products of a

supplier firm and using products of another enterprise (without an appropriate contract),

“barriers” appear. For example, coal mine may have a road to the railways line. When the road

construction is completed, change of transporters may cost much. Meanwhile, coal mining finds

a monopolist before it. In this case, option would be to develop another expensive line to

another railway. A price fixed by the monopoly railway is not-competitive price, and coal mining

may pay only expenses for transportations lower than the optimal number [Anderson, R.J., D.]. If

two enterprises have ownership and management on a single property for maximizing profits,

then one enterprise would be no obstacle for another and an optimal number of goods would

have been sent from one place to another. Therefore, when realizing demonopolization, it is

necessary to bring together foundations competing against others, under a single enterprise.

Coordination of activity of funds may be easy if they are managed through single center

and owned by the same firm. Efficiency enjoyed due to a vertical integration is much more than

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