IDEAS home Printed from
   My bibliography  Save this paper

International Monopoly under Uncertainty


  • Henry Aray

    () (Department of Economic Theory and Economic History, University of Granada.)


A domestic monopolistic firm has the option to service a foreign market through export or by setting up a plant in the host country under exchange rate uncertainty. We analyze the effect of the parameters of the demand and cost functions on hysteresis. We also show results on the effect of taxation and labor cost in attracting or avoiding relocation. We find that when the firm is multinational it pays more taxes. Much more importantly, a tax rate reduction is effective in attracting investment and avoiding relocation. When the firm is multinational it also incurs lower labor costs. However, labor cost is not determinant in the location of production.

Suggested Citation

  • Henry Aray, 2007. "International Monopoly under Uncertainty," ThE Papers 07/05, Department of Economic Theory and Economic History of the University of Granada..
  • Handle: RePEc:gra:wpaper:07/05

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Sung, Hongmo & Lapan, Harvey E, 2000. "Strategic Foreign Direct Investment and Exchange-Rate Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 411-423, May.
    2. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    3. Campa, Joe Manuel, 1993. "Entry by Foreign Firms in the United States under Exchange Rate Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 614-622, November.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Exchange rate uncertainty; real option; taxation; labor cost.;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange


    Access and download statistics


    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:gra:wpaper:07/05. 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: (Angel Solano Garcia.). General contact details of provider: .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.