Arbeitspapier

Strategic Outsourcing Revisited

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.

Language
Englisch

Bibliographic citation
Series: Diskussionspapier ; No. 15

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

Event
Geistige Schöpfung
(who)
Buehler, Stefan
Haucap, Justus
Event
Veröffentlichung
(who)
Universität der Bundeswehr Hamburg, Fächergruppe Volkswirtschaftslehre
(where)
Hamburg
(when)
2003

Handle
URN
urn:nbn:de:gbv:705-opus-1486
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Buehler, Stefan
  • Haucap, Justus
  • Universität der Bundeswehr Hamburg, Fächergruppe Volkswirtschaftslehre

Time of origin

  • 2003

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