 Market structure and strategic bi-sourcingHamid Beladi and Arijit Mukherjee Journal of Economic Behavior & Organization, 2012, vol. 82, issue 1, 210-219 Abstract: We provide a new rationale for bi-sourcing, which refers to the situation where a final goods producer buys an input from an outside supplier and also produces it in-house. We also show the effects of the product market competition and the implications of different and common outside input suppliers on the profits of the final goods producers. In-house input production reduces the price charged by the outside input supplier, and may make bi-sourcing as a profitable strategy. Under bi-sourcing, the final goods producers may be better off by outsourcing to a common input supplier than by outsourcing to different input suppliers. In the presence of bi-sourcing, the final goods producers may not have the incentive for cooperation in the product market. Our results show that even if the final goods producer's marginal cost of in-house input production is higher than the outside supplier's marginal cost of input production, bi-sourcing makes the consumers better off compared to complete outsourcing. Keywords: Bi-sourcing; Competition; In-house input production (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:82:y:2012:i:1:p:210-219 DOI: 10.1016/j.jebo.2012.01.004 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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