Make vs Buy in a Monopoly with Demand or Cost Uncertainty

Lambertini, Luca (2009) Make vs Buy in a Monopoly with Demand or Cost Uncertainty. Bologna: Dipartimento di Scienze economiche DSE, p. 21. DOI 10.6092/unibo/amsacta/4574. In: Quaderni - Working Paper DSE (671). ISSN 2282-6483.
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Abstract

The issue of technical progress under uncertainty is nested into the debate on vertical integration vs outsourcing, to show that, in general, the former is preferable to the latter in terms of both expected profits and technological efficiency. It is then shown that there exist (i) an optimal two part tariff where the unit price set by the upstream firm is conditional upon its R&D effort, and (ii) an optimal contract specifying the input price in terms of the initial capabilities of the sub-contractor, whereby the industry replicates the same performance as the vertically integrated firm as for both profits and R&D efforts.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Keywords
vertical integration, outsourcing, process innovation, uncertainty
Subjects
ISSN
2282-6483
DOI
Deposit date
09 Feb 2016 12:28
Last modified
09 Feb 2016 12:28
URI

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