Webbläsaren som du använder stöds inte av denna webbplats. Alla versioner av Internet Explorer stöds inte längre, av oss eller Microsoft (läs mer här: * https://www.microsoft.com/en-us/microsoft-365/windows/end-of-ie-support).

Var god och använd en modern webbläsare för att ta del av denna webbplats, som t.ex. nyaste versioner av Edge, Chrome, Firefox eller Safari osv.

Porträtt av Fredrik Andersson. Foto.

Fredrik Andersson

Prefekt Nationalekonomiska institutionen, Professor

Porträtt av Fredrik Andersson. Foto.

The cost-vs.-quality trade-off in make-or-buy decisions

Författare

  • Fredrik Andersson

Summary, in English

The make-or-buy decision is analyzed in a simple two-task principal-agent model. There is a cost-saving-vs.-quality trade-off in effort provision, both effort and outcome having these two dimensions. The principal faces a dichotomous choice between make/in-house, coming with weak cost-saving incentives for the agent, and buy/outsourcing, coming with strong incentives; the dichotomy is due to an incomplete-contracting limitation necessitating that one party be residual claimant of cost-savings. Choosing buy rather than make leads to
higher cost-saving effort and in a plausible main case to lower effort directed towards quality and lower equilibrium quality, this in spite of stronger direct quality-provision incentives. The attractiveness of make-vs.-buy is explored and shown to be aligned with its impact on quality.

Avdelning/ar

  • Nationalekonomiska institutionen

Publiceringsår

2023-10-19

Språk

Engelska

Dokumenttyp

Konferensbidrag

Ämne

  • Economics

Conference name

44th Meeting of the Association of Southern European Economic Theorists

Conference date

2023-10-19 - 2023-10-21

Conference place

Lisbon, Portugal

Aktiv

Published