Outsourcing with Heterogeneous Firms

Arghya Ghosh and Alberto Motta ()
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Alberto Motta: School of Economics, The University of New South Wales

No 2011-09, Discussion Papers from School of Economics, The University of New South Wales

Abstract: We look at imperfectly competitive markets where some consumers might be budget-constrained. We find that the equilibrium price under budget constrained demand (say, pB ) is often higher than the equilibrium price under standard demand (say, pA ). The relationship between pB and pA depends on the elasticity of the standard demand (at pA ), technology, and market structure. Lack of competition and inefficient technology make pB > pA more likely.

Keywords: Budget-constrained; elasticity; oligopoly pricing (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-05
New Economics Papers: this item is included in nep-bec and nep-com
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