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Multi-sourcing as an entry deterrence strategy

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  • Mukherjee, Arijit
  • Tsai, Yingyi

Abstract

This paper studies the rationale for multiple sourcing. In a simple model of outsourcing that embodies technology transfer and the threat of competition from the supplier(s) due to imitation, we show that multiple sourcing helps to deter entry by the suppliers into the final goods market and enhances profitability of the outsourcing firm. Our explanation for multiple outsourcing differs from the standard arguments, which either reduce the double marginalization problem or eliminate supply bottlenecks.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 25 (2013)
Issue (Month): C ()
Pages: 108-112

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Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:108-112

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Entry; Imitation; Multiple sourcing; Vertical technology transfer;

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Cited by:
  1. Bagchi, Aniruddha & Mukherjee, Arijit, 2014. "Technology licensing in a differentiated oligopoly," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 455-465.
  2. Chaudhuri, Sarbajit, 2013. "Foreign capital, Non-Traded Goods and Welfare in a Developing Economy in the presence of Externalities," MPRA Paper 52140, University Library of Munich, Germany.
  3. Tarun Kabiraj & Uday Bhanu Sinha, 2014. "Strategic Outsourcing with Technology Transfer under Cournot Competition," Economics Bulletin, AccessEcon, vol. 34(2), pages 1133-1140.
  4. Mukherjee, Arijit & Sinha, Uday Bhanu, 2014. "Can cost asymmetry be a rationale for privatisation?," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 497-503.

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