Strategic Outsourcing between Rivals
AbstractBy outsourcing key intermediate goods to a downstream competitor, a firm can credibly reveals its future quantity of the final good to its competitor, therefore force the latter to act as a Stackelberg follower in the downstream market. As a result, whether outsourcing occurs or not depends on the nature of the downstream competition. If firms compete in quantities, outsourcing occurs only if it generates a sufficiently large efficiency gain. Instead, if firms compete in prices, outsourcing always occurs whenever there is potential efficiency gain.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 11 (2010)
Issue (Month): 2 (November)
Outsourcing; Cournot duopoly; Bertrand duopoly;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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