DISORGANIZATION

Under central planning, many firms relied on a single supplier for cri tical inputs. Transition has led to decentralized bargaining between s uppliers and buyers. Under incomplete contracts or asymmetric informat ion, bargaining may inefficiently break down, and if chains of product ion link many specialized producers, output will decline sharply. Mech anisms that mitigate these problems in the West, such as reputation, c an only play a limited role in transition. The empirical evidence sugg ests that output has fallen farthest for the goods with the most compl ex production process, and that disorganization has been more importan t in the former Soviet Union than in Central Europe.