Integration versus Outsourcing with Vertical Linkages

Gaetano Alfredo Minerva

No 411, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: In the model by Grossman and Helpman (2002) no industry has both vertically integrated and specialized producers in equilibrium. I generalize their model by assuming that final goods producers (irrespective of whether they are vertically integrated with the upstream stage or specialized in the downstream stage only) need a basket of differentiated commodities, in addition to labor, as a fixed requirement for production. I then show the existence of an equilibrium populated simultaneously by vertically integrated and disintegrated firms.

Keywords: Vertical integration; Outsourcing; Vertical linkages; Industry equilibrium; Contractual (search for similar items in EconPapers)
JEL-codes: D23 D43 L24 (search for similar items in EconPapers)
Pages: 9
Date: 2017-02-21
New Economics Papers: this item is included in nep-com and nep-cta
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