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Sébastien MITRAILLE (Toulouse Business School) – "Outsource (some of) what you do best, to better outsource the rest" joint with Christophe Bernard
The Microeconomics Seminar: Every Wednesday at 12:15 pm.
Time: 12:15 pm – 1:30 pm
Date: 27th of June 2018
Place: Room 3001.
Sébastien MITRAILLE (Toulouse Business School) – “Outsource (some of) what you do best, to better outsource the rest” joint with Christophe Bernard
Abstract: We study a manufacturer’s decision to outsource operations to an external supplier, under asymmetric information on the supplier’s costs. Each operation belongs to a fixed set of differentiated elements, which must all be realized to sell the product, and firms’ marginal costs to perform these operations differ. The manufacturer compares the reduction of informational rents obtained by distorting the outsourcing perimeter, with the efficiency loss of externalizing too many operations he is best at, or of internalizing too many operations. Over or under-outsourcing may occur at equilibrium compared to the first best, depending on firms’ relative efficiencies. An efficient manufacturer may also shift the perimeter required from an inefficient supplier, to internalize the operations a more efficient supplier is best at. Last, a manufacturer screening suppliers must compare the overall efficiency of its supply chain to the efficiency obtained through a single pooling contract, which can be more profitable when the set of operations is fixed.
Marie-Laure Allain, Pierre Boyer, Laurent Linnemer & Morgane Cure (CREST)
Food is provided.