Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159649
Authors: 
Gori, Giuseppe Francesco
Lambertini, Luca
Tampieri, Alessandro
Year of Publication: 
2012
Series/Report no.: 
Quaderni - Working Paper DSE 810
Abstract: 
Empirical evidence shows that an increase in trade liberalisation causes an increase in foreign direct investments (FDIs). Here we propose an explanation to this apparent puzzle by exploiting the intensity of competition in a Bertrand duopoly with convex costs where the two firms enter in a new market. We adopt Dastidar's (1995) approach, delivering a continuum of Bertrand-Nash equilibria ranging above marginal cost pricing, to show that softening competition may indeed more than offset the standard effect generated by trade costs, thereby leading to a positive relationship between trade liberalisation and FDIs.
JEL: 
F12
F13
F23
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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