Restructuring or Delegating: Which Is Better?

Manel Antelo and Lluis Bru

No 19, Documentos de trabajo - Analise Economica from IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia

Abstract: In a certain industry, a given firm is operating with high costs of production and does not know if this is because the production costs in this industry are intrinsically high or because it is inefficient. To resolve this uncertainty, it must choose between continuing to produce correcting the inefficiency by itself (restructuring) or transfering a part or all its business to another firm of the same industry which is already efficient (subcontracting or delegating). Furthermore, regarding the policies of delegating, we consider two, temporary delegation (renting) and definitive delegation (selling). This paper justifies the existence of policies both of restructuring and subcontracting in a context of asymmetric information.

Keywords: Delegation; Transfer of production; Restructuring (search for similar items in EconPapers)
JEL-codes: L22 L23 L62 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:edg:anecon:0019

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