publication . Preprint . 2005

Offshore Outsourcing Induced by Domestic Providers

Yutian Chen; Pradeep Dubey; Debapriya Sen;
Open Access
  • Published: 01 May 2005
Abstract
We show that offshore outsourcing can occur even when there are no economies of scale or cost advantages for the foreign firms. What drives the phenomenon is that domestic firms, by accepting orders for intermediate goods, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final good. Thus they have incentive to quote high provider prices to ward off future competitors, compelling them to outsource offshore.
Subjects
free text keywords: Offshore outsourcing, Cournot duopoly, Stackelberg duopoly, jel:D41, jel:L11, jel:L13

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