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Strategic investments and multinational firms under oligopoly

  • José J. Sempere Monerris

    ()

    (Universitat de València)

  • Rafael Moner Colonques

    ()

    (Universitat de València)

  • Vicente Orts Ríos

    (Universitat Jaume I)

We have developed a simple oligopoly model in which foreign direct investment (FDI) decisions are determined in an endogenous fashion. There is a host oligopoly facing competition from a foreign oligopoly in the form of either foreign investment or exports. Then, we propose a multi-stage game to stress the role played by the interactions among foreign rival firms´ decisions, and we identify some of the determinants of a switch from an exporting strategy to an FDI strategy. A delay in the investment is more likely found for big enough country-specific fixed costs and low values of the oligopoly profitability. Our model provides a theoretical basis which leads to predictions in line with previous empirical studies.

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File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-1997-16.pdf
File Function: Fisrt version / Primera version, 1997
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 1997-16.

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Length: 17 pages
Date of creation: Jan 1997
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:1997-16
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