 Bidding for outsourcing contracts with capacity investments and cost asymmetryTarun Jain, Jishnu Hazra and T. C. E. Cheng Journal of the Operational Research Society, 2020, vol. 71, issue 12, 1986-2012 Abstract: In this article, we consider a service supply chain where two vendor firms compete to win an information technology outsourcing contract from a client firm, which faces uncertain demand. The vendors’ variable operations costs are private information. The vendors also serve an external market with uncertain demand. After the award of the contract through bidding competition, vendors invest in capacity to meet their service requirements. We derive the optimal sourcing strategy for the client firm and the capacity investment decisions of the vendor firms. We characterise a threshold policy on the client’s outsourced requirements with respect to demand variability. We also observe that as the vendors’ mean cost increases, the requirements outsourced by the client firm decrease. In addition, we observe a threshold policy on the client’s outsourced requirements with respect to cost variability through numerical studies. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:tjorxx:v:71:y:2020:i:12:p:1986-2012 Ordering information: This journal article can be ordered from DOI: 10.1080/01605682.2019.1650617 Access Statistics for this article Journal of the Operational Research Society is currently edited by Tom Archibald More articles in Journal of the Operational Research Society from Taylor & Francis Journals |
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