Outsourcing and Vertical Integration in a Competitive Industry

23 Pages Posted: 12 Aug 2009 Last revised: 18 Apr 2012

See all articles by Federico Ciliberto

Federico Ciliberto

University of Virginia - Department of Economics; Centre for Economic Policy Research (CEPR)

John C. Panzar

Northwestern University - Department of Economics

Date Written: April 1, 2011

Abstract

We develop a partial equilibrium, perfectly competitive framework of a (potentially) vertically oriented industry. There are three types of firms: Upstream firms that use primary factors to produce an intermediate; downstream firms that use primary factors and intermediates to produce a final good; and vertically integrated firms that do both. We establish conditions under which vertically integrated firms exist and outsource (part of) the production of the intermediate input. We study the changes in industry configurations resulting from changes in costs and demand.

Keywords: Competitive Industry, Vertical Integration, Outsourcing

JEL Classification: F11, L11, L22

Suggested Citation

Ciliberto, Federico and Panzar, John C., Outsourcing and Vertical Integration in a Competitive Industry (April 1, 2011). Southern Economic Journal, 2011, 77(4), 885-900, Available at SSRN: https://ssrn.com/abstract=1446886

Federico Ciliberto (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

John C. Panzar

Northwestern University - Department of Economics ( email )

2001 Sheridan Rd
Evanston, IL 60208
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
160
Abstract Views
923
rank
204,183
PlumX Metrics