Dual Sourcing and Resilient Supply Chains: The Case of Essential Resources

Thomas Gehrig; Rune Stenbacka

doi:10.1007/s11293-023-09782-9

Dual Sourcing and Resilient Supply Chains: The Case of Essential Resources

Thomas Gehrig^*, Rune Stenbacka

^*Corresponding author for this work

Economics, Helsinki

Research output: Contribution to journal › Article › Scientific › peer-review

Abstract

The resilience of supply chains is analyzed in a model of strategic technology investments in markets with essential resources. With a monopoly supplier, dual sourcing is a strategy to reduce switching costs in the long-run. It serves as an insurance mechanism against future opportunism by providing access to competitive global markets. Investments in dual sourcing are required to limit abuse of market power by the active source provider, even though the option of dual sourcing may not be exercised in equilibrium. The analysis has implications for the European natural gas market. Liquefied natural gas terminals may serve a strategic purpose of limiting ex-post opportunism even when delivering gas by pipeline is more efficient.

Original language	English
Peer-reviewed scientific journal	Atlantic Economic Journal
ISSN	0197-4254
DOIs	https://doi.org/10.1007/s11293-023-09782-9
Publication status	Published - 11.12.2023
MoE publication type	A1 Journal article - refereed

Keywords

511 Economics
dual sourcing
resilience
switching costs
predatory investments
supply security
geopolitics

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Dual Sourcing and Resilient Supply Chains: The Case of Essential Resources

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