Make and buy in a polluting industry

Iida, Takeshi; Mukherjee, Arijit

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.

Citation

Iida, T., & Mukherjee, A. (2020). Make and buy in a polluting industry. Journal of Public Economic Theory, 22(6), 1852-1874. https://doi.org/10.1111/jpet.12440

• Journal Article Type: Article
• Acceptance Date: Mar 6, 2020
• Online Publication Date: Apr 28, 2020
• Publication Date: 2020-12
• Deposit Date: Mar 9, 2020
• Publicly Available Date: Apr 29, 2022
• Journal: Journal of Public Economic Theory
• Print ISSN: 1097-3923
• Electronic ISSN: 1467-9779
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 22
• Issue: 6
• Pages: 1852-1874
• DOI: https://doi.org/10.1111/jpet.12440
• Keywords: Bi-sourcing; Make-and-Buy; Outsourcing; Pollution; Production; Tax
• Public URL: https://nottingham-repository.worktribe.com/output/4114222
• Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1111/jpet.12440