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General Distorted Input Ratios in Vertical Relationships

Author

Listed:
  • Martin Peitz
  • Dongsoo Shin

Abstract

A project leader sources an input from a supporter and combines it with an input produced in-house. The leader has private information about the project’s cost environment. We show that if the leader can commit to the in-house input level, the input ratio is distorted upward when the in-house input is not too costly—the in-house input is produced in excess and, thus, partly wasted. By contrast, without the leader’s commitment to the in-house input level, the input ratio is distorted downward when the in-house input is su¢ciently costly—the outsourced input is produced in excess and, thus, partly wasted

Suggested Citation

  • Martin Peitz & Dongsoo Shin, 2018. "General Distorted Input Ratios in Vertical Relationships," CRC TR 224 Discussion Paper Series crctr224_2018_060, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2018_060
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp060
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    More about this item

    Keywords

    labor income tax; labor supply elasticity; general equilibrium; cross-country panel;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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