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Restructuring Or Delegating: Which Is Better?

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Author Info
Eduardo L. Gimenez Fernandez (Departamento de Fundamentos de Analisis Economico e Historia Economica. Universidad de Vigo.)
Manuel Gonzalez-Gomez (Departamento de Fundamentos de Analisis Economico e Historia Economica. Universidad de Vigo.)
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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Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Análise Económica with number 0019.

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Handle: RePEc:edg:anecon:0019

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Keywords: Delegation; Transfer of production; Restructuring;

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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.:
  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. [Downloadable!] (restricted)
  2. James J. Anton & Dennis A. Yao, 1987. "Second Sourcing and the Experience Curve: Price Competition in Defense Procurement," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 57-76, Spring. [Downloadable!] (restricted)
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This page was last updated on 2009-12-2.


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