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Outsourcing Under Incomplete Information

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  • Tarun Kabiraj
  • Uday Bhanu Sinha

Abstract

The Author considers outsourcing decision of a firm in a Cournot duopoly with incomplete information. There is incomplete information about the production technology of one firm. It is shown that outsourcing can occur as outcomes of a separating or pooling perfect Bayesian equilibrium, although it is not profitable under complete information. Thus, the paper shows that asymmetric information can itself be a reason for outsourcing. It further shows that under outsourcing equilibrium consumers gain, producers as a whole loose, but the overall welfare falls.

Suggested Citation

  • Tarun Kabiraj & Uday Bhanu Sinha, 2017. "Outsourcing Under Incomplete Information," Working Papers id:12217, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:12217
    Note: Institutional Papers
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    References listed on IDEAS

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    1. Buehler, Stefan & Haucap, Justus, 2006. "Strategic outsourcing revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 325-338, November.
    2. Kabiraj, Tarun & Sinha, Uday Bhanu, 2016. "Strategic outsourcing with technology transfer under price competition," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 281-290.
    3. Tarun Kabiraj & Uday Bhanu Sinha, 2014. "Strategic Outsourcing with Technology Transfer under Cournot Competition," Economics Bulletin, AccessEcon, vol. 34(2), pages 1133-1140.
    4. Arie Lewin & Silvia Massini & Carine Peeters, 2008. "Why are companies offshoring innovation ?the emerging global race for talent," Working Papers CEB 08-009, ULB -- Universite Libre de Bruxelles.
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    9. Anil Arya & Brian Mittendorf & David E. M. Sappington, 2008. "The Make-or-Buy Decision in the Presence of a Rival: Strategic Outsourcing to a Common Supplier," Management Science, INFORMS, vol. 54(10), pages 1747-1758, October.
    10. Yutian Chen, 2011. "Strategic sourcing for entry deterrence and tacit collusion," Journal of Economics, Springer, vol. 102(2), pages 137-156, March.
    11. Arie Lewin & Silvia Massini & Carine Peeters, 2009. "Why are companies offshoring innovation the emerging global race for talent (Journal of International Business Studies (2009) 40 (901-925) DOI:10.1057/jibs.2008.92)," ULB Institutional Repository 2013/205625, ULB -- Universite Libre de Bruxelles.
    12. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(3), pages 433-446.
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