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Vertical product differentiation with subcontracting

Joaquín Andaluz ()
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Joaquín Andaluz: Department of Economic Analysis. University of Zaragoza.

Documentos de Trabajo from Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza

Abstract: The paper examines the effects of subcontracting on vertical product differentiation in a spatial competition model. It is shown that the level of differentiation is determined by the consignor’s bargaining power and the ratio of final product transport costs to the cost of the input contracted. Assuming that the consignor has total bargaining power, subcontracting will imply a reduction in quality and a greater difference between qualities.

Keywords: Subcontracting; Vertical Product Differentiation; Spatial Competition (search for similar items in EconPapers)
JEL-codes: L14 L22 D43 C78 (search for similar items in EconPapers)
Date: 2008-01
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Persistent link: http://EconPapers.repec.org/RePEc:zar:wpaper:dt2008-01

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