Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81341
Authors: 
Andersson, Fredrik
Year of Publication: 
2009
Series/Report no.: 
IFN Working Paper 815
Abstract: 
The make-or-buy decision is analyzed in a simple framework combining contractual incompleteness with the existence of imperfect but contractible performance measures. Contractual incompleteness gives rise to two regimes, identified with make and buy. The performance measure on which comprehensive contracts can be written is imperfect in the sense of being subject to manipulation. The main result is that the impact – or externality – of manipulation on true performance is key; a positive (negative) such externality favors make (buy).
Subjects: 
Make-or-buy decision
Manipulation
Outsourcing
JEL: 
D23
L22
L24
Document Type: 
Working Paper

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