Outsourcing and Vertical Integration in a Competitive Industry

Federico Ciliberto and John Panzar

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a partial equilibrium, perfectly competitive framework of a (potentially) vertically integrated industry. There are three types of firms: upstream firms that use primary factors to produce an intermediate; downstream firms that use primary factors and intermediates to produce a final good; and vertically integrated firms that do both. We establish conditions under which vertically integrated firms exist and outsource (part of) the production of the intermediate input. We study the changes in industry configurations resulting from changes in costs and demand.

Keywords: Competitive Industry; Vertical Integration; Outsourcing (search for similar items in EconPapers)
JEL-codes: L11 L22 (search for similar items in EconPapers)
Date: 2009-10-30
New Economics Papers: this item is included in nep-com and nep-cse
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Citations: View citations in EconPapers (2)

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https://mpra.ub.uni-muenchen.de/38628/1/MPRA_paper_38628.pdf revised version (application/pdf)

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