Outsourcing induced by strategic competition

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Outsourcing induced by strategic competition

Author Info

Chen, Yutian
Dubey, Pradeep
Sen, Debapriya

Additional information is available for the following registered author(s):

Debapriya Sen

Abstract

We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14899.

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Date of creation: 24 Apr 2009
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Handle: RePEc:pra:mprapa:14899

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Other versions of this item:

Paper
- Yutian Chen & Pradeep Dubey & Debapriya Sen, 2006. "Outsourcing Induced by Strategic Competition," Cowles Foundation Discussion Papers 1589, Cowles Foundation, Yale University. [Downloadable!]
- Yutian Chen & Pradeep Dubey & Debapriya Sen, 2006. "Outsourcing Induced by Strategic Competition," Levine's Bibliography 321307000000000674, UCLA Department of Economics. [Downloadable!]

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-05-02 (All new papers)
NEP-BEC-2009-05-02 (Business Economics)
NEP-COM-2009-05-02 (Industrial Competition)
NEP-CSE-2009-05-02 (Economics of Strategic Management)
NEP-MIC-2009-05-02 (Microeconomics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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Other versions:
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Other versions:
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Other versions:
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Other versions:
- Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005. [Downloadable!]
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Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Pierce, Andrea & Sen, Debapriya, 2009. "Outsourcing versus technology transfer: Hotelling meets Stackelberg," MPRA Paper 15673, University Library of Munich, Germany. [Downloadable!]

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