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Tacit collusion over Foreign Direct Investment under oligopoly

Collie, David Robert 2009. Tacit collusion over Foreign Direct Investment under oligopoly. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University. Available at: http://business.cardiff.ac.uk/sites/default/files/...

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Abstract

A two-country model of the FDI versus export decisions of firms is analysed. The analysis considers both the Cournot duopoly and the Bertrand duopoly models with differentiated products. It is shown that the static game is often a prisoners' dilemma where both firms are worse off when they both undertake FDI. To avoid the prisoners' dilemma, in an infinitely-repeated game, the firms can collude over their FDI versus export decisions. Then, a reduction in trade costs may lead firms to switch from exporting to undertaking FDI when trade costs are relatively high. Also, collusion over FDI may increase welfare

Item Type: Monograph (Working Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
J Political Science > JA Political science (General)
Uncontrolled Keywords: Collusion; Trade Liberalisation; Foreign Direct Investment; Cournot Oligopoly; Bertrand Oligopoly; Infinitely-Repeated Game.
Publisher: Cardiff University
ISBN: 1749-6101
Last Modified: 04 Jun 2017 03:57
URI: http://orca.cf.ac.uk/id/eprint/29570

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