Resource title

Strategic Outsourcing Revisited

Resource image

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Resource description

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.

Resource author

Stefan Buehler, Justus Haucap

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/23533

Resource license

Adapt according to the presented license agreement and reference the original author.