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A game theoretic-model of multinational firm location

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Author Info

  • José Pedro Pontes

Abstract

The paper deals with a location game involving two symmetric firms. The players choose strategies in a spatial setting made up by two asymmetric countries,where the smallest country has a labour cost advantage. Determination of equilibrium location patterns enables to assess under what conditions both forms of foreign direct investment (horizontal and vertical) will take place in terms of a set of parameters (namely market size, relative size of the small country, and extent of its cost advantage). The firms interact through input transactions that bring about multiplicity of equilibria. An application to the evolution of the Portuguese car industry is performed.

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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2000/02.

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Date of creation: 2000
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Handle: RePEc:ise:isegwp:wp22000

Contact details of provider:
Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

Related research

Keywords: Multinationals; Firm location; Noncooperative games; New economic geography;

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