IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v46y2025i4p2144-2180.html
   My bibliography  Save this article

Make‐or‐buy decisions in vertically differentiated input markets

Author

Listed:
  • Duarte Brito
  • Markos Tselekounis

Abstract

We study the optimal regulatory policy when two qualitatively differentiated upstream inputs are available. We consider a setting where a vertically integrated incumbent invests in upgrading the quality of the basic upstream input it owns, whereas a rival entrant chooses between making its own upgraded input and buying either input from the incumbent at regulated prices. We show that each of the three options available for the entrant can be socially optimal, depending on the investment cost parameters. However, the socially optimal input pricing policy is quite unlikely to resolve the trade‐off between promoting welfare and encouraging investment in quality.

Suggested Citation

  • Duarte Brito & Markos Tselekounis, 2025. "Make‐or‐buy decisions in vertically differentiated input markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2144-2180, June.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:4:p:2144-2180
    DOI: 10.1002/mde.4077
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.4077
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.4077?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:46:y:2025:i:4:p:2144-2180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.