Tacit collusion over foreign direct investment under oligopoly

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Cardiff Economics Working Papers ; No. E2009/8

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Multinational Firms; International Business ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices ; International Business Administration
• Subject: Collusion ; Trade Liberalisation ; Foreign Direct Investment ; Cournot Oligopoly ; Bertrand Oligopoly ; Infinitely-Repeated Game ; Außenhandelsförderung ; Direktinvestition ; Kartell ; Duopol ; Wohlfahrtsanalyse ; Spieltheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Collie, David R.
• Event: Veröffentlichung
• (who): Cardiff University, Cardiff Business School
• (where): Cardiff
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/65757
• Last update: 10.03.2025, 11:42 AM CET