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Make and buy in a polluting industry

Iida, Takeshi; Mukherjee, Arijit

Authors

Takeshi Iida



Abstract

The literature paid significant attention to analyze the rationale for the make-or-buy strategy of firms. However, a related empirically relevant strategy of make-and-buy did not get much attention. We show that the presence of tax/subsidy policies, which are particularly important in the presence of environmental pollution , may create a rationale for the make-and-buy strategy of firms. Thus, we provide a new rationale for the make-and-buy strategy of firms which is different from the existing reasons, such as, uncertainty, market power of the input suppliers , moral hazard, and capacity utilization. We also discuss the implications of international harmonization and global welfare maximizing bi-sourcing.

Journal Article Type Article
Publication Date Apr 28, 2020
Journal Journal of Public Economic Theory
Print ISSN 1097-3923
Electronic ISSN 1467-9779
Publisher Wiley
Peer Reviewed Peer Reviewed
APA6 Citation Iida, T., & Mukherjee, A. (2020). Make and buy in a polluting industry. Journal of Public Economic Theory, https://doi.org/10.1111/jpet.12440
DOI https://doi.org/10.1111/jpet.12440
Keywords Bi-sourcing; Make-and-Buy; Outsourcing; Pollution; Production; Tax
Publisher URL https://onlinelibrary.wiley.com/doi/abs/10.1111/jpet.12440

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This file is under embargo until Apr 29, 2022 due to copyright restrictions.




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