Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197711 
Year of Publication: 
2018
Series/Report no.: 
ISER Discussion Paper No. 1039
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
This paper examines the role of outside options in a downstream duopoly with exclusive vertical relations as in the Japanese automobile industry. In our setup, the downstream firms have outside options, and two upstream firms with exclusive relations can engage in cost reducing investments. More interestingly, each upstream firm can choose whether to voluntarily generate technology spillovers to its rival. We show that better outside options of the downstream firms can induce voluntary technology spillovers in the upstream level, increasing the profits of all firms on the vertical chain.
Subjects: 
Strategic sourcing
Outside option
Spillovers
Vertical relations
JEL: 
L13
O32
M11
C72
Document Type: 
Working Paper

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