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Revisiting Oligopolistic Reaction : Are FDI Decisions Strategic Complements

Listed author(s):
  • Keith Head

    (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia)

  • Thierry Mayer

    ()

    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • John Ries

    (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia)

Knickerbocker (1973) introduced the notion of oligopolistic reaction to explain why firms follow rivals into foreign markets. We develop a model that incorporates central features of Knickerbocker's story—oligopoly, uncertainty, and risk aversion—to establish the conditions required to generate follow-the-leader behavior. We find that rival foreign investment will make risk-neutral firms less inclined to move abroad once its rivals have done so. We show that Knickerbocker's prediction relies on risk aversion and derive an expression for the minimum amount of risk aversion needed to generate oligopolistic reaction.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00267447.

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Length:
Date of creation: 2002
Publication status: Published in Journal of Economics and Management Strategy, Wiley, 2002, 11 (3), pp.453-472. 〈10.1111/j.1430-9134.2002.00453.x〉
Handle: RePEc:hal:cesptp:hal-00267447
DOI: 10.1111/j.1430-9134.2002.00453.x
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00267447
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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