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Title:A simple model of outsourcing with Cournot competition PDF Logo
Authors:Hübler, Michael
Issue Date:2007
Series/Report no.:Kieler Arbeitspapiere 1320
Abstract:The paper analyses a partial equilibrium outsourcing model with Cournot competition in intermediate good production. Final production is located in western Europe, whereas the intermediate good can be manufactured by a western (outsourcing) or eastern European supplier (offshore outsourcing). Interregional production (factor) allocation depending on factor prices and productivity levels is investigated analytically and graphically. The main results are: Higher production costs in one region reduce intermediate good production in both regions leading to a substitution effect between high- and low-skilled labour intensive inputs rather than between eastern and western low-skilled labour intensive inputs. The sensitivity of outsourcing activities to production cost changes is highest when the interregional cost differential is smallest.
Subjects:Offshoring
Outsourcing
Cournot competition
Intermediate good
JEL:J31
D24
D43
F20
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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