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Title:A race beyond the bottom: The nature of bidding for a firm PDF Logo
Authors:Furusawa, Taiji
Hori, Kazumi
Wooton, Ian
Issue Date:2010
Series/Report no.:CESifo working paper Trade Policy 3049
Abstract:We examine how the bidding environment may affect the outcome of tax competition between two countries (or two regions) in attracting a firm's foreign direct investment (FDI).We compare the equilibrium location choice and payoffs from an English auction, with both complete and incomplete information, relative to those in the traditional setting of a sealed-bid first-price auction. We find that an English auction leads to more aggressive bidding in 'race beyond the bottom,' where the nations may bid beyond their own valuations of the FDI. We also discuss the roles of auction protocol and information asymmetry on the auction outcome.
Subjects:tax competition
foreign direct investment
international ownership
English auction
information asymmetry
JEL:F12
F23
H25
H73
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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