Integration vs. Outsourcing in Industry Equilibrium

Gene Grossman and Elhanan Helpman

Working Papers from Tel Aviv

Abstract: We develop an equilibrium model of industrial structure in which the organization of firms is endogenous. Differentiated consumer products can be produced either by vertically integrated firms or by pairs of specialized companies. Production of each variety of consumer good requires a unique, specialized component. Vertically integrated firms can manufacture the components they need in the quantity and type that maximizes profits, but they face a relatively high cost of governance.

Keywords: ECONOMIC MODELS; INDUSTRIAL STRUCTURE; COMPETITION (search for similar items in EconPapers)
JEL-codes: D23 D43 D51 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2001
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Citations: View citations in EconPapers (19)

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