'Make-or-buy' in international oligopoly and the role of competitive pressure

D. Leahy, C. Montagna

    Research output: Working paperDiscussion paper

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    Abstract

    We study how competitive pressure influences the make-or-buy decision that oligopolistic firms face between producing an intermediate component in-house or purchasing it from a domestic supplier. We model outsourcing as a bilateral relationship in which the supplier undertakes relationship-specific investments. A home and foreign firm compete in the home market. Firms’ mode of operation decision depends on cost and strategic considerations. Competitive pressure increases firms’ incentive to outsource. Consumer gains from trade liberalisation are enhanced when it leads to less outsourcing.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2006

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.197
    ISSN (Print)1473-236X

    Keywords

    • Outsourcing
    • Vertical integration
    • Trade liberalisation
    • Oligopoly

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