Economising, Strategising and the Vertical Boundaries of the Firm

Dermot Leahy, Catia Montagna

Research output: Contribution to journalArticle

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Abstract

We bridge the organisational economics and industrial economics literatures on the vertical boundaries of the firm by contextualising the transaction cost approach to the make-or-buy decision within an oligopolistic market structure. Firms invest in the quality of the intermediate resulting in the endogenous determination of the price of the intermediate and marginal production cost of the final good. We highlight new strategic incentives to outsource and/or vertically integrate and show how these incentives can result in asymmetric-mode-of-operations, investment and costs. We apply our model to a number of different international trading setups.
Original languageEnglish
Article number20150085
JournalB.E. Journal of Theoretical Economics
Volume17
Issue number1
Early online date17 Jun 2016
DOIs
Publication statusPublished - Jan 2017

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Boundaries of the firm
Incentives
Cost of production
Industrial economics
Make or buy decisions
Costs
Market structure
Transaction costs
Organizational economics

Keywords

  • Oligopoly
  • Outsourcing
  • Vertical Integration
  • Trade Liberalisation

Cite this

Economising, Strategising and the Vertical Boundaries of the Firm. / Leahy, Dermot; Montagna, Catia.

In: B.E. Journal of Theoretical Economics, Vol. 17, No. 1, 20150085, 01.2017.

Research output: Contribution to journalArticle

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