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Restructuring or Delegating: Which Is Better?

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Author Info

  • Manel Antelo

    (Departamento de Fundamentos da Análise Económica. Universidade de Santiago de Compostela.)

  • Lluís Bru

    (Departamento de Teoría e Historia Economica. Universidad de Málaga.)

Abstract

In a certain industry, a given firm is operating with high costs of production and does not know if this is because the production costs in this industry are intrinsically high or because it is inefficient. To resolve this uncertainty, it must choose between continuing to produce correcting the inefficiency by itself (restructuring) or transfering a part or all its business to another firm of the same industry which is already efficient (subcontracting or delegating). Furthermore, regarding the policies of delegating, we consider two, temporary delegation (renting) and definitive delegation (selling). This paper justifies the existence of policies both of restructuring and subcontracting in a context of asymmetric information.

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Bibliographic Info

Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Analise Economica with number 0019.

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Length: 17 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:edg:anecon:0019

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Keywords: Delegation; Transfer of production; Restructuring;

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  1. Anton, James J & Yao, Dennis A, 1992. "Coordination in Split Award Auctions," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 681-707, May.
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