IDEAS home Printed from https://ideas.repec.org/a/kea/keappr/ker-199612-12-2-03.html
   My bibliography  Save this article

A Strategy for the Foreign Market Penetration under Complete Information

Author

Listed:
  • Seon Jae Kim

    (Paichai University)

  • Young Han Kim

    (Samsung Economic Research Institute)

Abstract

This study examines the optimal foreign market penetration strategy of a domestic firm when the firm engages in Bertrand competition with an incumbent firm in a foreign market. The study demonstrates that under complete information about the product quality of the entrant firm, the entrant firm prefers to choose a less expensive entry mode when the foreign consumers' marginal rate of substitution between quality and price is high. A high import tariff of the foreign government induces the entrant firm to prefer FDI to exporting if the MRS is high and FDI has a tariff-jumping effect. If the incumbent firm is a local firm, the entrant firm is more reserved in choosing FDI. When the incumbent firm is a local firm, an import tare improves foreign social welfare only when MRS is low. When MRS is high, the import tariff deteriorates social welfare of the foreign country.

Suggested Citation

  • Seon Jae Kim & Young Han Kim, 1996. "A Strategy for the Foreign Market Penetration under Complete Information," Korean Economic Review, Korean Economic Association, vol. 12(2), pages 47-69.
    • Handle: RePEc:kea:keappr:ker-199612-12-2-03
    as

    Download full text from publisher

    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-199612-12-2-03.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kea:keappr:ker-199612-12-2-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: KEA (email available below). General contact details of provider: https://edirc.repec.org/data/keaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.