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Complementary Inputs, Mutual Outsourcing, and Supplier Encroachment.

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Bibliographic Details
Title: Complementary Inputs, Mutual Outsourcing, and Supplier Encroachment.
Authors: Milliou, Chrysovalantou1 (AUTHOR), Serfes, Konstantinos2 (AUTHOR) ks346@drexel.edu
Source: Journal of Industrial Economics. Sep2025, Vol. 73 Issue 3, p458-479. 22p.
Subject Terms: *CONTRACTING out, *CONTRACTS, *INDUSTRIAL goods, *MARKET prices
Abstract: Final goods are typically produced using multiple complementary inputs. We examine the incentives and implications of supplier encroachment incorporating this fact and allowing for the possibility of mutual outsourcing between the encroached supplier and the incumbent. We show that mutual outsourcing can occur when both firms are present in the final good market. We also show that, unlike the single input case, the supplier refrains from encroaching when mutual outsourcing results in high wholesale prices and that encroachment can benefit the incumbent by generating input sales. Finally, we show that nonlinear contracts play a significant role for encroachment. [ABSTRACT FROM AUTHOR]
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Database: Business Source Index
Description
Abstract:Final goods are typically produced using multiple complementary inputs. We examine the incentives and implications of supplier encroachment incorporating this fact and allowing for the possibility of mutual outsourcing between the encroached supplier and the incumbent. We show that mutual outsourcing can occur when both firms are present in the final good market. We also show that, unlike the single input case, the supplier refrains from encroaching when mutual outsourcing results in high wholesale prices and that encroachment can benefit the incumbent by generating input sales. Finally, we show that nonlinear contracts play a significant role for encroachment. [ABSTRACT FROM AUTHOR]
ISSN:00221821
DOI:10.1111/joie.12419