Strategic Outsourcing Revisited

Justus Haucap and Stefan Buehler

No 15/2003, Working Paper from Helmut Schmidt University, Hamburg

Abstract: This paper analyzes a sequential game where firms decide about outsourcing the production of a non-specific input good to an imperfectly competitive input market. We apply the taxonomy of business strategies introduced by Fudenberg and Tirole (1984) to characterize the different equilibria. We find that outsourcing generally softens competition in the final product market. If firms anticipate the impact of their outsourcing decisions on input prices, there may be equilibria where firms outsource so as to collude or to raise rivalsâÃÂàcosts. We illustrate our analysis using a linear Cournot model.

JEL-codes: D43 L22 L23 L24 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2003-07-14
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Citations: View citations in EconPapers (2)

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Journal Article: Strategic outsourcing revisited (2006)
Working Paper: Strategic Outsourcing Revisited (2003)
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