The impact of product market competition on the decision to outsource with long term contracts

Teixeira, João

http://hdl.handle.net/10400.3/4961

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Authors

Teixeira, João

Abstract(s)

This paper analyzes how product market competition affects the firms’ choice between outsourcing with long term contracts and outsourcing to the spot market. Product market competition among buyers can lead to an increase in financial distress costs not only for firms outsourcing to the spot market but also for firms outsourcing with a long term contract. We derive the equilibrium for an oligopoly, and show that the equilibrium depends on the magnitude of these costs and on the level of efficiency of the supplier.

Keywords

Outsourcing Financial Distress Long Term Contracts Uncertainty

URI

http://hdl.handle.net/10400.3/4961

Citation

Teixeira, João C. A. (2011). The impact of product market competition on the decision to outsource with long term contracts, “Working Paper Series” nº 20/11, 26 pp.. Ponta Delgada: Universidade dos Açores, CEEAplA-A.