Efficient Sourcing and Debt Financing in Imperfect Product Markets
研究企业从竞争性供应商采购时，机会主义行为如何推高成本并影响生产决策，发现适当债务融资能缓解这一问题，使企业达到最优产量。
Supplier relations play an important role in determining a firm's product market strategy and position, by affecting the cost and quality of the product produced by the firm. These relations are especially significant because the cost of purchased materials for an average firm is more than half its total sales. In this paper, we model the adverse incentives of a firm that sources from a competitive supplier industry. We show that a firm's propensity to behave opportunistically towards its suppliers raises the firm's input costs by decreasing the number of suppliers servicing it. This results in a suboptimal production decision compared to the firm's first best choice. We argue that an appropriate level of debt financing alters the shareholder incentives and mitigates the hold-up problem. Further, we also show that at the optimal debt level, the firm produces its first best level of output.