On the Irrelevance of Input Prices for Make-or-Buy Decisions
This paper demonstrates that input prices need not reflect the costs of an efficient incumbent supplier in order to induce entrants to implement efficient make-or-buy decisions. Because of strategic downstream considerations, entrants may always undertake efficient make-or-buy decisions, regardless of the prices at which they are authorized to buy key inputs from incumbent suppliers.
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Volume (Year): 95 (2005)
Issue (Month): 5 (December)
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