In choosing whether to rely on markets, vertically integrate, or use some hybrid mode of governance, transacting parties consider both how well the various options mitigate opportunism and at what cost. Asset specificity is an important factor in this calculus and Joskow shows the many guises and roles of asset specificity. Such choices are not static, but we do not yet have a dynamic theory of why governance modes change and how contractual relations and organizations adapt to changing circumstances.