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Restructuring or Delegating: Which Is Better?

Author

Listed:
  • Manel Antelo

    (Departamento de Fundamentos da Análise Económica. Universidade de Santiago de Compostela.)

  • Lluís Bru

    (Departamento de Teoría e Historia Económica. Universidad de Málaga.)

Abstract

In a certain industry, a given firm is operating with high costs of production and does not know if this is because the production costs in this industry are intrinsically high or because it is inefficient. To resolve this uncertainty, it must choose between continuing to produce correcting the inefficiency by itself (restructuring) or transfering a part or all its business to another firm of the same industry which is already efficient (subcontracting or delegating). Furthermore, regarding the policies of delegating, we consider two, temporary delegation (renting) and definitive delegation (selling). This paper justifies the existence of policies both of restructuring and subcontracting in a context of asymmetric information.

Suggested Citation

  • Manel Antelo & Lluís Bru, 2001. "Restructuring or Delegating: Which Is Better?," Documentos de trabajo - Analise Economica 0019, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    • Handle: RePEc:edg:anecon:0019
    as

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    References listed on IDEAS

    as
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    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. James J. Anton & Dennis A. Yao, 1987. "Second Sourcing and the Experience Curve: Price Competition in Defense Procurement," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 57-76, Spring.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Delegation; Transfer of production; Restructuring;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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