Theoretical Economics Letters
Volume 13, Issue 3 (June 2023)
ISSN Print: 2162-2078 ISSN Online: 2162-2086
Google-based Impact Factor: 1.19 Citations h5-index & Ranking
Nash Bargaining and Outsourcing in a Duopoly Market ()
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ABSTRACT
In this paper, we clarify the impact of Nash bargaining between manufacturers and an input supplier on manufacturer outsourcing decisions. At a subgame perfect equilibrium, the manufacturers select in-house production, and no outsourcing equilibrium exists. In the intra-industry outsourcing literature, Sinha (2016) shows that manufacturers select in-house production in response to the existence of fixed costs. In contrast, we clarified that Nash bargaining leads to in-house production equilibrium even when the cost function is not associated with fixed costs.
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