Horizontal outsourcing and price competition: The role of sole sourcing commitment
研究双寡头企业在伯特兰竞争下，独家采购承诺如何影响横向外包的发生条件，发现即使成本劣势较小也可能出现外包，且可能软化竞争或加剧价格战。
Previous studies on horizontal outsourcing between competing duopolists emphasize cost factors, such as economies of scale and/or variable cost advantages in Cournot markets, as potential explanations. Our paper studies horizontal outsourcing when two competing firms engage in Bertrand competition, and highlights the important role of sole sourcing commitment. We adopt the framework of a multistage duopoly game that comprises of an incumbent and an entrant. The incumbent has the capability to make a key component in‐house, and the entrant, who is a rival of the incumbent in the downstream market, can source the component from either the incumbent or a supplier not participating in the end‐product market. We find that if the entrant commits to sole sourcing, horizontal outsourcing can occur when the incumbent has a component cost advantage or even a small cost disadvantage over the alternative supplier. Specifically, if the component cost gap is small, horizontal outsourcing may soften downstream market competition and benefit both firms at the expense of inducing higher prices for the consumers. If the incumbent has a significant cost advantage, horizontal outsourcing may lead to an increased downstream price war by expanding the total supply of end products. Without sole sourcing commitment, horizontal outsourcing occurs only when the incumbent has a cost advantage, and it always strengthens downstream price competition. By contrast, if the firms engage in downstream Cournot competition, sole sourcing commitment has no impact on the adoption of horizontal outsourcing, and the entrant sources from her rival only when the incumbent enjoys a significant cost advantage. Finally, we also study various extensions to check and confirm the robustness of our main results to key model assumptions.