Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76183
Authors: 
Buehler, Stefan
Haucap, Justus
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0305
Abstract: 
This paper analyzes a sequential game where firms decide about outsourcing the production of a non-specific input good to an imperfectly competitive input market. We apply the taxonomy of business strategies introduced by Fudenberg and Tirole (1984) to characterize the different equilibria. We find that outsourcing generally softens competition in the final product market. If firms anticipate the impact of their outsourcing decisions on input prices, there may be equilibria where firms outsource so as to collude or to raise rivals' costs. We illustrate our analysis using a linear Cournot model.
JEL: 
D43
L22
L23
L24
Document Type: 
Working Paper

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