A simple model of outsourcing with Cournot competition

Arbeitspapier

The paper analyses a partial equilibrium outsourcing model with Cournot competition in intermediate good production. Final production is located in western Europe, whereas the intermediate good can be manufactured by a western (outsourcing) or eastern European supplier (offshore outsourcing). Interregional production (factor) allocation depending on factor prices and productivity levels is investigated analytically and graphically. The main results are: Higher production costs in one region reduce intermediate good production in both regions leading to a substitution effect between high- and low-skilled labour intensive inputs rather than between eastern and western low-skilled labour intensive inputs. The sensitivity of outsourcing activities to production cost changes is highest when the interregional cost differential is smallest.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1320

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; International Factor Movements and International Business: General
• Subject: Outsourcing ; Cournot competition ; Intermediate good ; Offshoring ; Offshoring ; Outsourcing ; Vorprodukt ; Duopol ; Internationale Arbeitsteilung ; Allokation ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hübler, Michael
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/3977
• Last update: 10.03.2025, 11:43 AM CET