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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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Publisher 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
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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://www.may.ie/academic/economics/
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Related research
Keywords: Outsourcing; Vertical Integration; Trade Liberalisation; Oligopoly;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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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.:
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Full references

Cited by:
(explanations, 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. Dermot Leahy & Catia Montagna, 2008. "Outsourcing Versus Fdi In Oligopoly Equilibrium," Discussion Papers 215, University of Dundee, Economic Studies. [Downloadable!]
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