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Trade Liberalization and Strategic Outsourcing

Author

Listed:
  • Chen, Yongmin
  • Ishikawa, Jota
  • 石川, 城太
  • Yu, Zhihao

Abstract

This paper develops a model of strategic outsourcing. With trade liberalization in the intermediate-product market, a domestic firm may choose to purchase a key intermediate good from a more efficient foreign producer, who also competes with the domestic firm for a final good. This has a strategic effect on competition. Unlike the outsourcing motivated by cost saving, the strategic outsourcing has a collusive effect that could raise the prices of both intermediate and final goods. Trade liberalization in the intermediate-good market has a very different effect compared with trade liberalization in the final-good market.
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Suggested Citation

  • Chen, Yongmin & Ishikawa, Jota & 石川, 城太 & Yu, Zhihao, 2001. "Trade Liberalization and Strategic Outsourcing," Discussion Papers 2001-04, Graduate School of Economics, Hitotsubashi University.
    • Handle: RePEc:hit:econdp:2001-04
    Note: 37019
    as

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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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