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Outsourcing with Heterogeneous Firms

Author

Listed:
  • Arghya Ghosh

    (School of Economics, The University of New South Wales)

  • Alberto Motta

    (School of Economics, The University of New South Wales)

Abstract

We look at imperfectly competitive markets where some consumers might be budget-constrained. We find that the equilibrium price under budget constrained demand (say, pB ) is often higher than the equilibrium price under standard demand (say, pA ). The relationship between pB and pA depends on the elasticity of the standard demand (at pA ), technology, and market structure. Lack of competition and inefficient technology make pB > pA more likely.

Suggested Citation

  • Arghya Ghosh & Alberto Motta, 2011. "Outsourcing with Heterogeneous Firms," Discussion Papers 2011-09, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2011-09
    as

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2011-09.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Budget-constrained; elasticity; oligopoly pricing;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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