Strategic input outsourcing and equilibrium location choice

Lin, Yen-Ju; Lin, Yan-Shu; Tu, Kuang-I

doi:10.1007/s00168-015-0720-y

Cited by 3 publications

(4 citation statements)

References 25 publications

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“…Similarly, when comparing Proposition 5(ii) with Proposition 2, the impacts of s and τ on the equilibrium prices and profits under complete outsourcing are opposite to those under bi-sourcing. 24 Now, we compare the profits under bi-sourcing with the profits under complete outsourcing, in order to illustrate the role played by bi-sourcing in Matsushima (2004) [18]. As discussed above, all else being equal, bi-sourcing reduces the importance of the costsaving effect, because part of the inputs is procured in-house.…”

Section: Equilibrium Outcome With Bi-sourcingmentioning

confidence: 99%

“…Joskow (1991) [20] provides an empirical survey that widely documents the existence of firm-specific input suppliers. 4 For example, Sony internally produces display panels-which are an input for the final goods (namely, LCD TVs)-but it also procures display panels from professional panel suppliers such as AU Optronics (see Lin et al, 2016) [24].…”

Section: Conflicts Of Interestmentioning

confidence: 99%

“…Outsourcing and bi-sourcing in the context of spatial competition have rarely been investigated. The only paper we are aware of is by Lin et al (2016) [24]. They consider an industry with two downstream firms-one of them can produce the input itself, whereas the other has to purchase it from an external supplier.…”

Section: Introductionmentioning

confidence: 99%

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Location of Firms and Outsourcing

Colombo,

Mukherjee

2023

Games

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We analyze the location of final goods producers under spatial competition with strategic input price determination by firm-specific input suppliers when the final goods producers undertake complete outsourcing or bi-sourcing. Under complete outsourcing, the final goods producers locate closer as the distance between the input suppliers decreases, but the distance between the final goods producers may increase or decrease with the transportation costs of the consumers and the transportation costs between the input suppliers and the final goods producers depending on the distance between the input suppliers. The possibility of bi-sourcing reduces the benefit from saving the transportation costs between the input suppliers and the final goods producers, and creates effects which are opposite to those under complete outsourcing. Thus, our results differ significantly from the extant literature considering either no strategic input price determination or strategic input price determination under competition in the input market. We also discuss the implications on the profits, consumer surplus and welfare, and the implications of endogenous location choice of the input suppliers.

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Section: Equilibrium Outcome With Bi-sourcingmentioning

confidence: 99%

Section: Conflicts Of Interestmentioning

confidence: 99%

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Location of Firms and Outsourcing

Colombo,

Mukherjee

2023

Games

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“…Brekke and Straume’s (2004) paper is closely related to our paper, as they analyze outsourcing through bilateral monopoly relations between upstream and downstream firms. Lin et al (2016) develop a similar model and show how the validity of the principle of maximum differentiation depends on the cost advantage of the cost-efficient integrated firm. Our model shares a similar context with the aforementioned studies, in that duopoly downstream firms outsource their input from an upstream monopolist.…”

Section: Introductionmentioning

confidence: 99%

Location Choice of a Partially–Private Monopoly Supplier

Lingga

Simanjuntak

2021

Studies in Microeconomics

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This paper analyzes the location choice of an upstream monopolist who supplies input to asymmetric duopoly firms in a downstream market. The monopolist is partially private, in that it cares not only about its profit maximization but also about the survival of the downstream firms. Based on the Hotelling model, we find that the monopolist is always attracted to locate closer to the efficient downstream firm. In particular, when the efficiency difference between the two downstream firms is not too high, such that no firm is driven out of the market, the monopolist locates at a distance of 1/6 from the efficient firm in the line segment of unit length. Finally, considering the downstream firms’ survival, we show that the upstream monopolist charges a higher input price on the efficient firm. This study may be relevant to the product differentiation framework, in which firms can benefit from producing goods that are close to the preference of high-type consumers; to the pharmaceutical industry, in which pharmacy companies must cover a broad market segment; or to the policymaking process, in which policymakers may have an incentive to make a policy preferred by a particular group of the society. JEL Classifications: D42, L12, L230

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Managerial delegation under capacity commitment: A tale of two sources

Colombo

Scrimitore

2018

Journal of Economic Behavior & Organization

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Strategic input outsourcing and equilibrium location choice

Cited by 3 publications

References 25 publications

Location of Firms and Outsourcing

Location of Firms and Outsourcing

Location Choice of a Partially–Private Monopoly Supplier

Managerial delegation under capacity commitment: A tale of two sources

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