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Employment protection and globalisation in dynamic oligopoly

  • Dewit, Gerda

    (National University of Ireland Maynooth)

  • Dermot Leahy
  • Catia Montagna

We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexibility and strategic concerns. We show that the strategic effects under Cournot work towards domestic anchorage in the country with adjustment costs while those under Bertrand do not.Strategic agglomeration can occur in the inflexible country under Cournot and even under Bertrand provided uncertainty and foreign direct investment costs are low.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 57.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:57
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