Competition for foreign direct investment when countries are not sure of site values
The fiscal tug-of-war between two countries to play host to a foreign- owned firm is like a Nash game. Suppose that the countries are not sure how much the firm values the sites that they offer to it. Also suppose that the countries fashion their expectation of site value by assigning the same likelihood to each value that they deem possible. Then, if they are quite unsure about site values, they will offer small subsidies to the firm. If they are pretty sure about site values, they will offer large subsidies. Here is the intuition behind the results: When a country is unsure about the value of its site, it is also unsure that a stingy offer will drive the firm to its rival. So it may take the chance and make a stingy offer rather than a generous one.
(This abstract was borrowed from another version of this item.)
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- King, I. & McAfee, R.P. & Welling, L., 1990. "Industrial Blackmail," Papers 130, Calgary - Department of Economics.
- King, I. & Welling, L., 1990.
"Commitment, Efficiency and Footloose Firms,"
126, Calgary - Department of Economics.
- Wilson, John Douglas, 1991.
"Tax competition with interregional differences in factor endowments,"
Regional Science and Urban Economics,
Elsevier, vol. 21(3), pages 423-451, November.
- Wilson, J.D., 1990. "Tax Competition With Interregional Differences In Factor Endowments," Working Papers 4, John Deutsch Institute for the Study of Economic Policy.
- Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
- Franklin R Root & Ahmed A Ahmed, 1978. "The influence of policy instruments on manufacturing Direct Foreign investment in developing countries," Journal of International Business Studies, Palgrave Macmillan, vol. 9(3), pages 81-94, September.
- Wildasin, David E., 1991. "Some rudimetary 'duopolity' theory," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 393-421, November.
- Doyle, Christopher & van Wijnbergen, Sweder, 1984.
"Taxation of Foreign Multinationals: A Sequential Bargaining Approach to Tax Holidays,"
CEPR Discussion Papers
25, C.E.P.R. Discussion Papers.
- Chris Doyle & Sweder Wijnbergen, 1994. "Taxation of foreign multinationals: A sequential bargaining approach to tax holidays," International Tax and Public Finance, Springer, vol. 1(3), pages 211-225, October.
- Perloff, Jeffrey M & Salop, Steven C, 1985.
"Equilibrium with Product Differentiation,"
Review of Economic Studies,
Wiley Blackwell, vol. 52(1), pages 107-20, January.
- Perloff, Jeffrey M & Salop, Steven, 1984. "Equilibrium with product differentiation," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4cq0m6s3, Department of Agricultural & Resource Economics, UC Berkeley.
- Wildasin, D.E., 1987.
"Nash equilibria in models of fiscal competition,"
CORE Discussion Papers
1987020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-56, December.
- Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
- Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
- Ian King & R. Preston McAfee & Linda Welling, 1993. "Industrial Blackmail: Dynamic Tax Competition and Public Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 590-608, August.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
- Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
- Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
- Bond, Eric W & Samuelson, Larry, 1986. "Tax Holidays as Signals," American Economic Review, American Economic Association, vol. 76(4), pages 820-26, September.
When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:9:y:2000:i:1:p:53-68. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.