Vertical product differentiation with subcontracting
AbstractThe paper examines the effects of subcontracting on vertical product differentiation in a spatial competition model. It is shown that the level of differentiation is determined by the consignor’s bargaining power and the ratio of final product transport costs to the cost of the input contracted. Assuming that the consignor has total bargaining power, subcontracting will imply a reduction in quality and a greater difference between qualities.
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Bibliographic InfoPaper provided by Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza in its series Documentos de Trabajo with number dt2008-01.
Date of creation: Jan 2008
Date of revision:
Subcontracting; Vertical Product Differentiation; Spatial Competition;
Find related papers by JEL classification:
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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