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Multinational Learning under Asymmetric Information

Author

Listed:
  • Neelam Jain

    () (Jesse H. Jones Graduate School of Management, Rice University)

  • Leonard J. Mirman

    (Department of Economics, University of Virginia)

Abstract

The aim of this paper is to analyze the competition between a multinational and the incumbent firm in a foreign market under asymmetric information about demand and unobservable outputs. It is shown that the incumbent firm increases its production in the first period to signal to the multinational that the demand is low. The multinational reduces its output in the foreign market in order to signal-jam. In addition, the multinational increases its production in the other market. However, total production of the multinational is lower. Implications for research and development expenditure by the multinational are examined.

Suggested Citation

  • Neelam Jain & Leonard J. Mirman, 2001. "Multinational Learning under Asymmetric Information," Southern Economic Journal, Southern Economic Association, vol. 67(3), pages 637-655, January.
  • Handle: RePEc:sej:ancoec:v:67:3:y:2001:p:637-655
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    Cited by:

    1. Jain, N., 2016. "Financing and Mode of Entry in Foreign Markets," Working Papers 15/16, Department of Economics, City University London.
    2. Karam, Fida & Daher, Wassim, 2013. "Insider trading in a two-tier real market structure model," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(1), pages 44-52.
    3. Lorenzo Esposito, 2014. "Con Annibale alle porte. L'internazionalizzazione del sistema bancario e il caso italiano," Moneta e Credito, Economia civile, vol. 67(266), pages 311-338.

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