Strategic outsourcing with technology transfer under price competition

Authors

Tarun Kabiraj, Indian Statistical Institute, Kolkata
Uday Bhanu Sinha, Delhi School of Economics

Article Type

Research Article

Publication Title

International Review of Economics and Finance

Abstract

Consider a framework where two firms produce differentiated goods and compete in prices, and one of them possesses input production technology, superior to that of an existing independent input supplier. We show that the superior technology owning firm can sell its patent to and outsource inputs from the input supplier. This happens if the degree of product differentiation is small or the technological gap between the two input producing firms is small. While the outsourcing firm gains, both consumers' welfare and social welfare go down. Interestingly, sometimes the rival firm's profit increases. These results have implications for competition policy.

First Page

281

Last Page

290

DOI

10.1016/j.iref.2016.02.016

Publication Date

7-1-2016

Comments

Open Access; Green Open Access

Recommended Citation

Kabiraj, Tarun and Sinha, Uday Bhanu, "Strategic outsourcing with technology transfer under price competition" (2016). Journal Articles. 4465.
https://digitalcommons.isical.ac.in/journal-articles/4465