1. Strategic outsourcing and quality choice: Is a vertical integration model sustainable?
- Author
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Miyamoto, Yoshinari
- Subjects
VERTICAL integration ,CONTRACTING out ,RECESSIONS ,PRODUCT differentiation - Abstract
This paper uses two versions of a vertical product differentiation model with price competition to investigate how strategic behavior between rival firms influences which organizational production mode each firm adopts: that is, either vertical integration or outsourcing. We show that not only a symmetric configuration, where both high‐ and low‐quality firms outsource, but also an asymmetric configuration, where the high‐quality firm produces in‐house whereas the low‐quality firm outsources, are acceptable as a subgame‐perfect equilibrium outcome. We explore the implications of these results in light of the recent slump in business of Japanese electronics enterprises in the flat‐panel television industry. [ABSTRACT FROM AUTHOR]
- Published
- 2021
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