On the Cost-vs-Quality Tradeoff in Make-or-Buy Decisions

Research, Preprint OPEN
Andersson, Fredrik;
(2010)
  • Publisher: Department of Economics, Lund Universtiy
  • Subject: multitask principal-agent problem | Economics | make-or-buy decision; manipulation; outsourcing | Nationalekonomi | make-or-buy decision | quality
    • jel: jel:D23 | jel:L25 | jel:L24

The make-or-buy decision is analyzed in a simple two-task principal-agent model. There is a cost-saving/quality tradeoff in effort provision. The principal faces a dichotomous choice between weak ("make") and strong ("buy") cost-saving incentives for the agent; the dich... View more
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