The Strategic Role of Information Asymmetry on Demand for the Multinational Enterprise
(2003)
Files
2003-2.pdf
Open Access - Adobe PDF
- 438.03 KB
Details
- Authors
- Abstract
- We study how asymmetric information impinge on oligopolistic firms?decision between direct investment and exports in a game-theoretic model with Bayesian learning. Host firms have superior information about the market demand and foreign firms can improve their knowledge if foreign direct investment (FDI) is undertaken. In addition to the well-know tension between the fixed set-up costs of investment, the additional variable costs of exports and oligopoly size, the incentive to invest abroad is explained by strategic learning effect. FDI may be observed even if foreign firms are pessimistic or trade costs are zero. Interestingly, compared with the certainty equivalent, the equilibrium number of investors is larger when foreign firms hold optimistic beliefs or, if these are pessimistic, when the strategic learning effect outweighs the conjecture effect.
- Affiliations
Citations
Moner-Colonques, R., Orts, V., & Sempere Monerris, J. J. (2003). The Strategic Role of Information Asymmetry on Demand for the Multinational Enterprise (ECON Discussion Papers 2003/13). https://hdl.handle.net/2078.5/130138