Suppose that Timekeepers, a company that produces high end hourglasses, is located in LakeCharles, Louisiana.The company has a contract with Anguilla in order to import theirfine white sand for use in its hourglasses. This sand is top-of-the line and has nosubstitute.

The contract is up for negotiation and the hurricane season is expected to be quite hazardous for the foreseeable future.Disappointingly, legal costs for contract negotiation have also increased considerably.Also, dealing with red tape of getting the sand out ofAnguilla has become cumbersome, but the government is very friendly to United Statesfirms and has encouraged local economic development.

First of all, illustrate and explain contract duration due to higher legal costs using themarket for contracts in Chapter 6, ceteris paribus.Secondly, might the time be right toforgo a new contract and instead vertically integrate with the sand supplier in Anguilla?Why or why not?