Location of Firms and Outsourcing
We analyze the location of final goods producers under spatial competition with strategic input price determination by firm-specific input suppliers when the final goods producers undertake complete outsourcing or bi-sourcing. Under complete outsourcing, the final goods producers locate closer as th...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-10-01
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| Series: | Games |
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| Online Access: | https://www.mdpi.com/2073-4336/14/6/70 |
| _version_ | 1797380999350321152 |
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| author | Stefano Colombo Arijit Mukherjee |
| author_facet | Stefano Colombo Arijit Mukherjee |
| author_sort | Stefano Colombo |
| collection | DOAJ |
| description | We analyze the location of final goods producers under spatial competition with strategic input price determination by firm-specific input suppliers when the final goods producers undertake complete outsourcing or bi-sourcing. Under complete outsourcing, the final goods producers locate closer as the distance between the input suppliers decreases, but the distance between the final goods producers may increase or decrease with the transportation costs of the consumers and the transportation costs between the input suppliers and the final goods producers depending on the distance between the input suppliers. The possibility of bi-sourcing reduces the benefit from saving the transportation costs between the input suppliers and the final goods producers, and creates effects which are opposite to those under complete outsourcing. Thus, our results differ significantly from the extant literature considering either no strategic input price determination or strategic input price determination under competition in the input market. We also discuss the implications on the profits, consumer surplus and welfare, and the implications of endogenous location choice of the input suppliers. |
| first_indexed | 2024-03-08T20:45:03Z |
| format | Article |
| id | doaj.art-bbc0d2dd7a454be698d551410ba14253 |
| institution | Directory Open Access Journal |
| issn | 2073-4336 |
| language | English |
| last_indexed | 2024-03-08T20:45:03Z |
| publishDate | 2023-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Games |
| spelling | doaj.art-bbc0d2dd7a454be698d551410ba142532023-12-22T14:10:26ZengMDPI AGGames2073-43362023-10-011467010.3390/g14060070Location of Firms and OutsourcingStefano Colombo0Arijit Mukherjee1Department of Economics and Finance, Università Cattolica del Sacro Cuore, Largo Gemelli 1, I-20123 Milan, ItalyIndustrial Economics Department, University of Nottingham, Nottingham NG8 1BB, UKWe analyze the location of final goods producers under spatial competition with strategic input price determination by firm-specific input suppliers when the final goods producers undertake complete outsourcing or bi-sourcing. Under complete outsourcing, the final goods producers locate closer as the distance between the input suppliers decreases, but the distance between the final goods producers may increase or decrease with the transportation costs of the consumers and the transportation costs between the input suppliers and the final goods producers depending on the distance between the input suppliers. The possibility of bi-sourcing reduces the benefit from saving the transportation costs between the input suppliers and the final goods producers, and creates effects which are opposite to those under complete outsourcing. Thus, our results differ significantly from the extant literature considering either no strategic input price determination or strategic input price determination under competition in the input market. We also discuss the implications on the profits, consumer surplus and welfare, and the implications of endogenous location choice of the input suppliers.https://www.mdpi.com/2073-4336/14/6/70locationinput suppliersoutsourcingbi-sourcing |
| spellingShingle | Stefano Colombo Arijit Mukherjee Location of Firms and Outsourcing Games location input suppliers outsourcing bi-sourcing |
| title | Location of Firms and Outsourcing |
| title_full | Location of Firms and Outsourcing |
| title_fullStr | Location of Firms and Outsourcing |
| title_full_unstemmed | Location of Firms and Outsourcing |
| title_short | Location of Firms and Outsourcing |
| title_sort | location of firms and outsourcing |
| topic | location input suppliers outsourcing bi-sourcing |
| url | https://www.mdpi.com/2073-4336/14/6/70 |
| work_keys_str_mv | AT stefanocolombo locationoffirmsandoutsourcing AT arijitmukherjee locationoffirmsandoutsourcing |