Strategic outsourcing revisited

Arbeitspapier

This paper analyzes a sequential game where firms decide about outsourcing the production of a non-specific input good to an imperfectly competitive input market. We apply the taxonomy of business strategies introduced by Fudenberg and Tirole (1984) to characterize the different equilibria. We find that outsourcing generally softens competition in the final product market. If firms anticipate the impact of their outsourcing decisions on input prices, there may be equilibria where firms outsource so as to collude or to raise rivals' costs. We illustrate our analysis using a linear Cournot model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0305

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Firm Organization and Market Structure ; Organization of Production ; Contracting Out; Joint Ventures; Technology Licensing
• Subject: Outsourcing ; Duopol ; Unvollkommener Wettbewerb ; Spieltheorie ; Theorie ; Extensives Spiel

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buehler, Stefan ; Haucap, Justus
• Event: Veröffentlichung
• (who): University of Zurich, Socioeconomic Institute
• (where): Zurich
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/76183
• Last update: 10.03.2025, 11:41 AM CET