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Outsourcing with Heterogeneous Firms

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  • Arghya Ghosh

    ()
    (School of Economics, The University of New South Wales)

  • Alberto Motta

    ()
    (School of Economics, The University of New South Wales)

Abstract

We look at imperfectly competitive markets where some consumers might be budget-constrained. We find that the equilibrium price under budget constrained demand (say, pB ) is often higher than the equilibrium price under standard demand (say, pA ). The relationship between pB and pA depends on the elasticity of the standard demand (at pA ), technology, and market structure. Lack of competition and inefficient technology make pB > pA more likely.

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2011-09.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2011-09.

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Length: 26 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:swe:wpaper:2011-09

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Keywords: Budget-constrained; elasticity; oligopoly pricing;

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