Economising, Strategising and the Decision to Outsource

Dermot Leahy and Catia Montagna

No 251, Dundee Discussion Papers in Economics from Economic Studies, University of Dundee

Abstract: We study the make-or-buy decision of oligopolistic firms in an industry in which final good production requires specialised inputs. Firms’ mode of operation decision depends on both the incentive to economize on costs and on strategic considerations. We explore the strategic incentives to outsource and show that asymmetric equilibria emerge, with firms choosing different modes of operation, even when they are ex-ante identical. With ex-ante asymmetries, higher cost firms are more likely to outsource. We apply our model to a number of different international trading setups.

Keywords: Outsourcing; Vertical Integration; Trade Liberalisation; Oligopoly (search for similar items in EconPapers)
JEL-codes: F12 L13 L14 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-04
New Economics Papers: this item is included in nep-bec, nep-com and nep-int
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Related works:
Working Paper: Economising, Strategising and the Decision to Outsource (2011)
Working Paper: Economising, Strategising and the Decision to Outsource (2011)
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