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Horizontal FDI in a Dynamic Cournot - Oligopoly with Endogenous Entry

Author

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  • Laszlo Goerke

    (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University)

Abstract

Entry in a homogeneous Cournot-oligopoly is excessive if and only if there is business-stealing (Amir et al. 2014). The excessive entry prediction has been derived primarily for closed economies and using a welfarist benchmark. We extend this framework and allow for (1) horizontal FDI in a multi-period setting and (2) interest group-based government behaviour. Opening the market to greenfield investments from abroad tends to aggravate the entry distortion. Moreover, market opening may reduce welfare if a more pronounced entry distortion dominates the gain in consumer surplus. Finally, a government, which places sufficiently little weight on the interests of consumers, will object to market opening, even if welfare rises.

Suggested Citation

  • Laszlo Goerke, 2020. "Horizontal FDI in a Dynamic Cournot - Oligopoly with Endogenous Entry," IAAEU Discussion Papers 202003, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  • Handle: RePEc:iaa:dpaper:202003
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    References listed on IDEAS

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    Cited by:

    1. Laszlo Goerke, 2021. "Tax Evasion by Firms," IAAEU Discussion Papers 202104, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    2. Goerke, Laszlo, 2020. "A political economy perspective on horizontal FDI in a dynamic Cournot-oligopoly with endogenous entry," European Journal of Political Economy, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Excessive Entry; Cournot-Oligopoly; Horizontal FDI; Political Support Function;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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