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Make-Or-Buy’ In International Oligopoly And The Role Of Competitive Pressure

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Author Info

  • Dermot Leahy

    ()
    (Economics Finance and Accounting, National University of Ireland, Maynooth)

  • Catia Montagna

    (University of Dundee and Leverhulme Centre for Research on Globalisation and Economic Policy, University of Nottingham)

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    Abstract

    We study how competitive pressure influences the make-or-buy decision that oligopolistic firms face between producing an intermediate component in-house or purchasing it from a domestic supplier. We model outsourcing as a bilateral relationship in which the supplier undertakes relationship-specific investments. A home and foreign firm compete in the home market. Firms’ mode of operation decision depends on cost and strategic considerations. Competitive pressure increases firms’ incentive to outsource. Consumer gains from trade liberalisation are enhanced when it leads to less outsourcing.

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    Bibliographic Info

    Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1901107.pdf.

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    Length: 33
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:may:mayecw:n1901107.pdf

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    Postal: Maynooth, Co. Kildare
    Phone: 353-1-7083728
    Fax: 353-1-7083934
    Web page: http://economics.nuim.ie
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    Keywords: Outsourcing; Vertical Integration; Trade Liberalisation; Oligopoly;

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