dc.contributor.author | Mandy, David M. | eng |
dc.date.issued | 2007 | eng |
dc.description.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. | eng |
dc.identifier.citation | Department of Economics, 2007 | eng |
dc.identifier.uri | http://hdl.handle.net/10355/2603 | eng |
dc.publisher | Department of Economics | eng |
dc.relation.ispartof | Economics publications | eng |
dc.relation.ispartofcommunity | University of Missouri-Columbia. College of Arts and Sciences. Department of Economics | eng |
dc.relation.ispartofseries | Working papers (Department of Economics);WP 07-01 | eng |
dc.rights | OpenAccess. | eng |
dc.rights.license | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License. | |
dc.source.uri | http://econ.missouri.edu/working-papers/2007/wp0701_mandy.pdf | eng |
dc.subject | input pricing policy | eng |
dc.subject | productive efficiency | eng |
dc.subject.lcsh | Pricing | eng |
dc.title | When Do Input Prices Matter For Make-Or-Buy Decisions? | eng |
dc.type | Working Paper | eng |