Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/65757
Authors: 
Collie, David R.
Year of Publication: 
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

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