Multinational Firms and the Tariff-jumping Argument - a Game Theoretic Analysis With Some Unconventional Conclusions
(1992) European Economic Review — Vol. 36, n° 8, p. 1557-1571 (1992)
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- Abstract
- A game is analysed in which a foreign multinational chooses between direct investment in, and exporting to, the host country, while a domestically based potential entrant decides whether or not to enter the domestic market. Contrary to the traditional analysis, no simple relationship emerges between the cost variables and the 'direct investment v. export' choice. The existence of a tariff may cause a shift away from foreign investment or else induce tariff-jumping investment. Finally, tariff-jumping is proved to be welfare improving only if no local firms would have entered the market under free trade.
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Citations
Motta, M. (1992). Multinational Firms and the Tariff-jumping Argument - a Game Theoretic Analysis With Some Unconventional Conclusions. European Economic Review, 36(8), 1557-1571. https://doi.org/10.1016/0014-2921(92)90006-I (Original work published 1992)