Dundee Discussion Papers in Economics 251: Economising, strategising and the decision to outsource

Dermot Leahy, Catia Montagna

    Research output: Working paperDiscussion paper

    Abstract

    We study the make-or-buy decision of oligopolistic firms in an industry in which final good production requires specialised inputs. Firms’ mode of operation decision depends on both
    the incentive to economize on costs and on strategic considerations. We explore the strategic incentives to outsource and show that asymmetric equilibria emerge, with firms choosing different modes of operation, even when they are ex-ante identical. With ex-ante asymmetries, higher cost firms are more likely to outsource. We apply our model to a number of different international trading setups.
    Original languageEnglish
    PublisherUniversity of Dundee
    Number of pages35
    Publication statusPublished - Apr 2011

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.251
    ISSN (Print)1473-236X

    Keywords

    • Outsourcing
    • Vertical integration
    • Trade liberalisation
    • Oligopoly

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