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Outsourcing and Vertical Integration in a Competitive Industry
We develop a partial equilibrium, perfectly competitive framework of a (potentially) vertically integrated industry. There are three types of firms: upstream firms that use primary factors to produce an intermediate good; downstream firms that use primary factors and intermediate goods to produce a...
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Published in: | Southern economic journal 2011-04, Vol.77 (4), p.885-900 |
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container_title | Southern economic journal |
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creator | Ciliberto, Federico Panzar, John C. |
description | We develop a partial equilibrium, perfectly competitive framework of a (potentially) vertically integrated industry. There are three types of firms: upstream firms that use primary factors to produce an intermediate good; downstream firms that use primary factors and intermediate goods to produce a final good; and vertically integrated firms that do both. We establish conditions under which vertically integrated firms exist and outsource (part of) the production of the intermediate input. We study the changes in industry configurations resulting from changes in costs and demand. |
doi_str_mv | 10.4284/0038-4038-77.4.885 |
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subjects | Business management Capital costs Competition Competitiveness Cost function Costs Demand functions Economic aspects Economies of scale Economies of scope Equilibrium F11 Final goods Fixed costs Industrial market Industrial output Industrial production Industrial structure Intermediate goods L11 L22 Manufacturing industry Market equilibrium Organizational structure Outsourcing Production management Specialization Studies Subcontracting Vertical integration |
title | Outsourcing and Vertical Integration in a Competitive Industry |
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