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International Enterprises and Endogenous Market Structure

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  • Claude Mathieu

Abstract

We propose a model of product differentiation where the strategies of two firms determine not only the market and industry structures but also the direct investment and trade patterns. In this framework, we show that the markets can have a monopoly or duopoly structure according to the trade barriers and the sunk cost levels. When the multinationalization of both firms is achieved, it is always in a prisoner's dilemma game which is Pareto damaging for the firms' profit. Moreover, the leader firm reling on the sunk costs, the direct investments can permit not only a "market pre-emption" abroad but also an "industry" pre-emption" as they lead to prevent the entry of the follower firm on both markets.

Suggested Citation

  • Claude Mathieu, 1997. "International Enterprises and Endogenous Market Structure," Annals of Economics and Statistics, GENES, issue 47, pages 171-195.
    • Handle: RePEc:adr:anecst:y:1997:i:47:p:171-195
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    File URL: http://www.jstor.org/stable/20076087
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    Cited by:

    1. Blanchard, Pierre & Gaigné, Carl & Mathieu, Claude, 2010. "The International Strategy of Firms: the Role of Endogenous Product Differentiation," Working Papers 210271, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    2. Blanchard, Pierre & Gaigné, Carl & Mathieu, Claude, 2012. "Trade costs and international strategy of firms: The role of endogenous product differentiation," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1023-1036.
    3. Emmanuelle Chevassus-Lozza & Jacques Gallezot & Danielle Galliano, 1999. "Exportations intra-firme ou directes : une alternative pour les firmes multinationales," Économie et Statistique, Programme National Persée, vol. 326(1), pages 97-112.
    4. Pierre Blanchard & Carl Gaigné & Claude Mathieu, 2012. "Trade Costs and Endogenous Product Differentiation for International Firms," Erudite Working Paper 2012-07, Erudite.

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