The make-or-buy choice in a mixed oligopoly: a theoretical investigation
We take a game theory approach to study the make-or-buy decisions of firms in a mixed duopoly. We assume that a managerial firm and a profit-oriented firm compete in a duopoly market for a final good, and they can choose whether making an intermediate input or buying it from a monopolistic upstream firm. We find that different equilibria may arise, depending on parameter constellations. In particular, if the technology used for the production of the intermediate input is too costly, then the internal organization of firms at equilibrium is mixed, creating a conflict with social preferences that would always privilege vertical integration to outsourcing.
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- Pol Antras & Elhanan Helpman, 2003.
Harvard Institute of Economic Research Working Papers
2005, Harvard - Institute of Economic Research.
- Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
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- Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
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1996_21, Columbia University, Department of Economics.
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- repec:hrv:faseco:4784029 is not listed on IDEAS
- Fershtman, Chaim & Judd, Kenneth L, 1987.
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American Economic Review,
American Economic Association, vol. 77(5), pages 927-40, December.
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