Trade Liberalization and Strategic Outsourcing
AbstractThis paper develops a model of strategic outsourcing. With trade liberalization in the intermediate-product market, a domestic firm may choose to purchase a key intermediate good from a more efficient foreign producer, who also competes with the domestic firm for a final good. This has a strategic effect on competition. Unlike the outsourcing motivated by cost saving, the strategic outsourcing has a collusive effect that could raise the prices of both intermediate and final goods. Trade liberalization in the intermediate-good market has a very different effect compared with trade liberalization in the final-good market.
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Bibliographic InfoPaper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 02-12.
Length: 27 pages
Date of creation: 01 Dec 2002
Date of revision: Jul 2004
Publication status: Published: Revised version in Journal of International Economics, Vol. 63, No. 2 (July 2004), pp. 419–436
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Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-18 (All new papers)
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