IDEAS home Printed from https://ideas.repec.org/p/cde/cdewps/295.html

Some searches may not work properly. We apologize for the inconvenience.

   My bibliography  Save this paper

FDI and International Collusion

Author

Listed:
  • Uday Bhanu Sinha

    (Department of Economics, Delhi School of Economics)

Abstract

We develop a supergame model of collusion between price-setting oligopolists when the trade between countries involves per-unit trade cost and FDI requires a fixed cost of setting up a subsidiary in a foreign country. We demonstrate that cross hauling of FDI may facilitate collusion based on territorial allocation of markets. Whenever FDI is not helpful for sustaining collusion, the collusive arrangement involves no FDI at all. With asymmetric number of home firms or with different sizes of the markets, FDI may facilitate international collusion at lower levels of trade costs and thus our analysis also throws some light on the empirical puzzle regarding the trade liberalisation and FDI flows observed since the 1990s.

Suggested Citation

  • Uday Bhanu Sinha, 2018. "FDI and International Collusion," Working papers 295, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:295
    as

    Download full text from publisher

    File URL: http://www.cdedse.org/pdf/work295.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Foreign direct investment; collusion; multimarket contact; cross hauling of FDI; price competition; homogenous good.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cde:cdewps:295. 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: Sanjeev Sharma (email available below). General contact details of provider: https://edirc.repec.org/data/cdudein.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.