An Equilibrium Analysis of Outsourcing Service Competition with Asymmetric Cost

Abstract

The paper investigates the contest behavior in outsourcing service competition by applying contest theory, and constructs the outsourcing service competition model based on contest model. On the basis of analyzing equilibrium of outsourcing service competition, it studies the equilibrium in light of cost variance of the outsourcing service suppliers and explores the effect of cost variance on the equilibrium. The conclusion shows that the cost variance not only makes the equilibrium service level of the suppliers different, but also almost diminishes both total equilibrium service level of the suppliers and the equilibrium average service level acquired by the purchaser.