Firm-asymmetry and strategic outsourcing

Cao, Jiyun; Mukherjee, Arijit; Sinha, Uday Bhanu

Abstract

In contrast to the conventional wisdom, we show that a final goods producer may outsource input production to an outside supplier even if the final goods producer possesses a superior input-production technology compared to the outside supplier. Such an outsourcing may reduce consumer surplus and social welfare. We also show that, in the presence of outsourcing, innovation by the firm doing outsourcing to reduce the cost of in-house input production and to reduce the input coefficient in the final goods production may have significantly different implications for the consumers and the society.

Citation

Cao, J., Mukherjee, A., & Sinha, U. B. (in press). Firm-asymmetry and strategic outsourcing. International Review of Economics and Finance, 53, https://doi.org/10.1016/j.iref.2017.10.008

• Journal Article Type: Article
• Acceptance Date: Oct 10, 2017
• Online Publication Date: Oct 16, 2017
• Deposit Date: Oct 11, 2017
• Publicly Available Date: Oct 17, 2018
• Journal: International Review of Economics and Finance
• Print ISSN: 1059-0560
• Electronic ISSN: 1059-0560
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 53
• DOI: https://doi.org/10.1016/j.iref.2017.10.008
• Keywords: Outsourcing; Consumer surplus; Welfare
• Public URL: https://nottingham-repository.worktribe.com/output/888009
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S105905601630274X
• Contract Date: Oct 11, 2017