Advanced Search
MyIDEAS: Login to save this paper or follow this series

Outsourcing Induced by Strategic Competition

Contents:

Author Info

  • Yutian Chen
  • Pradeep Dubey
  • Debapriya Sen

Abstract

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.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://cowles.econ.yale.edu/P/cd/d15b/d1589.pdf
Download Restriction: no

Bibliographic Info

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 321307000000000674.

as in new window
Length:
Date of creation: 08 Dec 2006
Date of revision:
Handle: RePEc:cla:levrem:321307000000000674

Contact details of provider:
Web page: http://www.dklevine.com/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier, Elsevier.
  2. Stefan Buehler & Justus Haucap, 2003. "Strategic Outsourcing Revisited," SOI - Working Papers, Socioeconomic Institute - University of Zurich 0305, Socioeconomic Institute - University of Zurich.
  3. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4170, C.E.P.R. Discussion Papers.
  4. Arya, Anil & Mittendorf, Brian & Sappington, David E.M., 2008. "Outsourcing, vertical integration, and price vs. quantity competition," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(1), pages 1-16, January.
  5. Chen, Yutian & Dubey, Pradeep & Sen, Debapriya, 2009. "Outsourcing induced by strategic competition," MPRA Paper 14899, University Library of Munich, Germany.
  6. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  7. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, Elsevier, vol. 28(1), pages 105-129, July.
  8. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, American Economic Association, vol. 80(1), pages 127-42, March.
  9. D. Lee Heavner, 2004. "Vertical Enclosure: Vertical Integration and the Reluctance to Purchase from a Competitor," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 52(2), pages 179-199, 06.
  10. Shy, Oz & Stenbacka, Rune, 2003. "Strategic outsourcing," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 50(2), pages 203-224, February.
  11. Anil Arya & Brian Mittendorf & David E. M. Sappington, 2008. "The Make-or-Buy Decision in the Presence of a Rival: Strategic Outsourcing to a Common Supplier," Management Science, INFORMS, INFORMS, vol. 54(10), pages 1747-1758, October.
  12. Pierce, Andrea & Sen, Debapriya, 2009. "Outsourcing versus technology transfer: Hotelling meets Stackelberg," MPRA Paper 15673, University Library of Munich, Germany.
  13. Vidal, Carlos J. & Goetschalckx, Marc, 1997. "Strategic production-distribution models: A critical review with emphasis on global supply chain models," European Journal of Operational Research, Elsevier, Elsevier, vol. 98(1), pages 1-18, April.
  14. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2001. "Trade Liberalization and Strategic Outsourcing," Discussion Papers, Graduate School of Economics, Hitotsubashi University 2001-04, Graduate School of Economics, Hitotsubashi University.
  16. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers, Florida - College of Business Administration 88-4, Florida - College of Business Administration.
  17. Pio Baake & Jörg Oechssler & Christoph Schenk, 1999. "Explaining cross-supplies," Journal of Economics, Springer, Springer, vol. 70(1), pages 37-60, February.
  18. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-74, May.
  19. Mailath George J., 1993. "Endogenous Sequencing of Firm Decisions," Journal of Economic Theory, Elsevier, Elsevier, vol. 59(1), pages 169-182, February.
  20. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(357), pages 95-106, March.
  21. repec:hrv:faseco:4784029 is not listed on IDEAS
  22. Pal, Debashis, 1996. "Endogenous Stackelberg Equilibria with Identical Firms," Games and Economic Behavior, Elsevier, Elsevier, vol. 12(1), pages 81-94, January.
  23. Yutian Chen, 2011. "Strategic sourcing for entry deterrence and tacit collusion," Journal of Economics, Springer, Springer, vol. 102(2), pages 137-156, March.
  24. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(1), pages 85-120, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Tarun Kabiraj & Uday Bhanu Sinha, 2014. "Strategic Outsourcing with Technology Transfer under Cournot Competition," Economics Bulletin, AccessEcon, vol. 34(2), pages 1133-1140.
  2. Pierce, Andrea & Sen, Debapriya, 2009. "Outsourcing versus technology transfer: Hotelling meets Stackelberg," MPRA Paper 15673, University Library of Munich, Germany.
  3. Chen, Yutian & Dubey, Pradeep & Sen, Debapriya, 2009. "Outsourcing induced by strategic competition," MPRA Paper 14899, University Library of Munich, Germany.
  4. Yutian Chen, 2011. "Strategic sourcing for entry deterrence and tacit collusion," Journal of Economics, Springer, Springer, vol. 102(2), pages 137-156, March.
  5. Chen, Yutian & Sen, Debapriya, 2010. "Strategic Outsourcing under Economies of Scale," MPRA Paper 20763, University Library of Munich, Germany.
  6. Tarun Kabiraj & Uday Bhanu Sinha, 2011. "Strategic Outsourcing with Technology Transfer," Working papers, Centre for Development Economics, Delhi School of Economics 203, Centre for Development Economics, Delhi School of Economics.
  7. Yutian Chen, 2010. "Strategic Outsourcing between Rivals," Annals of Economics and Finance, Society for AEF, Society for AEF, vol. 11(2), pages 301-311, November.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cla:levrem:321307000000000674. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.