Strategic Outsourcing Revisited

Stefan Buehler and Justus Haucap

No 305, SOI - Working Papers from Socioeconomic Institute - University of Zurich

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 rivals� costs. We illustrate our analysis using a linear Cournot model.

Keywords: strategic outsourcing; Cournot model (search for similar items in EconPapers)
JEL-codes: D43 L22 L23 L24 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2003-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Journal of Economic Behavior & Organization 6(3), 2006, pages 325-338

Downloads: (external link)
https://www.zora.uzh.ch/id/eprint/52177/1/wp0305.pdf First version, 2003 (application/pdf)

Related works:
Journal Article: Strategic outsourcing revisited (2006)
Working Paper: Strategic Outsourcing Revisited (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0305

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