Chen, Yutian and Dubey, Pradeep and Sen, Debapriya (2010): Outsourcing induced by strategic competition.
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We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside.
|Item Type:||MPRA Paper|
|Original Title:||Outsourcing induced by strategic competition|
|Keywords:||Intermediate goods, outsourcing, Cournot duopoly, Stackelberg duopoly|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection
|Depositing User:||Debapriya Sen|
|Date Deposited:||26. Jul 2010 03:09|
|Last Modified:||14. Feb 2013 17:03|
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Outsourcing induced by strategic competition. (deposited 29. Apr 2009 07:13)
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