Outsourcing induced by strategic competition

Yutian Chen, Pradeep Dubey and Debapriya Sen

International Journal of Industrial Organization, 2011, vol. 29, issue 4, 484-492

Abstract: We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside.

Keywords: Intermediate; goods; Outsourcing; Cournot; duopoly; Stackelberg; duopoly (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Outsourcing induced by strategic competition (2009)
Working Paper: Outsourcing Induced by Strategic Competition (2006)
Working Paper: Outsourcing Induced by Strategic Competition (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:4:p:484-492

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