This paper demonstrates that input prices need not reflect the costs of an efficient incumbent supplier in order to induce entrants to implement efficient make-or-buy decisions. Because of strategic downstream considerations, entrants may always undertake efficient make-or-buy decisions, regardless of the prices at which they are authorized to buy key inputs from incumbent suppliers.
Sappington, David E. M.
2005."On the Irrelevance of Input Prices for Make-or-Buy Decisions."American Economic Review,
95(5): 1631-1638.DOI: 10.1257/000282805775014344