Loading...
Please wait, while we are loading the content...
Similar Documents
When Do Input Prices Matter For Make-Or-Buy Decisions?
| Content Provider | Semantic Scholar |
|---|---|
| Author | Mandy, David M. |
| Copyright Year | 2007 |
| Abstract | We investigate input pricing regimes that induce efficient make-or-buy decisions by entrants when there is constant returns in the production of the input(s) and simultaneous noncooperative price competition in downstream retail markets. A necessary and sufficient condition for efficient make-or-buy decisions is derived. This condition shows that input prices are relevant for make-or-buy decisions except under restrictive and often unverifiable assumptions on the demand structure, and that the least informationally-demanding way to ensure efficient make-or-buy decisions is to price inputs at marginal cost. The extent to which input prices can depart from marginal cost while still inducing efficient make-or-buy decisions depends on the relative efficiency of the incumbent and the demand displacement ratio, with significant departures possible even for modest efficiency differences when products are nearly homogeneous. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://mospace.umsystem.edu/xmlui/bitstream/handle/10355/2603/WhenDoInputPricesMatter.pdf?sequence=1 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
