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Product market competition and boundaries of the firm

Author

Listed:
  • Jean-Etienne de Bettignies

Abstract

This paper studies the effects of product market competition on firm boundaries. In a duopoly setting, each retailer is associated with a manufacturer who must decide how to allocate property rights over a retail asset. Delegating property rights over the retail asset to an indepedent retailer (`disintegration') transfers incentives from the manufacturer to the retailer and has the benefit of increasing product quality and profits, owing to the retailer's superior efficiency. However, it also forces the manufacturer to forfeit part of the profits. Competition increases the net benefit from delegation and leads to more efficient, vertically disintegrated structures.

Suggested Citation

  • Jean-Etienne de Bettignies, 2006. "Product market competition and boundaries of the firm," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 948-970, August.
  • Handle: RePEc:cje:issued:v:39:y:2006:i:3:p:948-970
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    Citations

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    Cited by:

    1. Bayo-Moriones, Alberto & Galdon-Sanchez, Jose Enrique & Gil, Ricard, 2013. "'Make-or-Buy' of Peripheral Services in Manufacturing: Evidence from Spanish Plant-Level Data," IZA Discussion Papers 7138, Institute for the Study of Labor (IZA).
    2. Galdon-Sanchez, Jose Enrique & Gil, Ricard & Bayo-Moriones, Alberto, 2015. "Outsourcing of peripheral services: Evidence from Spanish manufacturing plant-level data," European Economic Review, Elsevier, vol. 78(C), pages 328-344.
    3. Bayo, Alberto & Galdon-Sanchez, Jose E. & Gil, Ricard, 2009. "The determinants of changes in the organization of production: Evidence from Spanish plant-level data," IESE Research Papers D/783, IESE Business School.
    4. repec:bla:presci:v:96:y:2017:i:2:p:299-323 is not listed on IDEAS

    More about this item

    JEL classification:

    • 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
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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