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A political economy perspective on horizontal FDI in a dynamic Cournot-oligopoly with endogenous entry

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  • Goerke, Laszlo

Abstract

Entry in a homogeneous Cournot-oligopoly is excessive if and only if there is business-stealing (Amir et al., 2014). The excessive entry prediction has been derived primarily for closed economies and using a welfarist benchmark. We extend this framework and allow for (1) horizontal FDI in a multi-period setting and (2) interest group-based government behaviour. Opening the market to greenfield investments from abroad tends to aggravate the entry distortion. Moreover, market opening may reduce welfare if a more pronounced entry distortion dominates the gain in consumer surplus. Finally, a government, which places sufficiently little weight on the interests of consumers, will object to market opening, even if welfare rises.

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  • Goerke, Laszlo, 2020. "A political economy perspective on horizontal FDI in a dynamic Cournot-oligopoly with endogenous entry," European Journal of Political Economy, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:poleco:v:63:y:2020:i:c:s0176268020300458
    DOI: 10.1016/j.ejpoleco.2020.101897
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    Cited by:

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    2. Laszlo Goerke, 2022. "Partisan competition authorities, Cournot‐oligopoly, and endogenous market structure," Southern Economic Journal, John Wiley & Sons, vol. 89(1), pages 238-270, July.

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