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| Title: | | Tacit collusion over foreign direct investment under oligopoly  |
| Authors: | | Collie, David R. |
| Issue Date: | | 2009 |
| Series/Report no.: | | Cardiff Economics Working Papers E2009/8 |
| Abstract: | | A two-country model of the FDI versus export decisions of firms is analysed. The analysis considers both the Cournot duopoly and the Bertrand duopoly models with differentiated products. It is shown that the static game is often a prisoners' dilemma where both firms are worse off when they both undertake FDI. To avoid the prisoners' dilemma, in an infinitely-repeated game, the firms can collude over their FDI versus export decisions. Then, a reduction in trade costs may lead firms to switch from exporting to undertaking FDI when trade costs are relatively high. Also, collusion over FDI may increase welfare. |
| Subjects: | | Collusion Trade Liberalisation Foreign Direct Investment Cournot Oligopoly Bertrand Oligopoly Infinitely-Repeated Game |
| JEL: | | F12 F23 L13 L41 M16 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Cardiff Economics Working Papers
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