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The scope for strategic asymmetry under international rivalry

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  • Gilbert, John
  • Koska, Onur A.
  • Oladi, Reza

Abstract

In the context of a model of international trade through reciprocal dumping with horizontally differentiated goods, we study the endogenous choice of quantities and prices as strategic variables. We show that while a Cournot outcome prevails under conditions of export rivalry, strategic asymmetry under foreign direct investment rivalry may be observed, especially when it is possible to initially deter FDI by committing to a price contract, and when switching is costly and/or takes time.

Suggested Citation

  • Gilbert, John & Koska, Onur A. & Oladi, Reza, 2022. "The scope for strategic asymmetry under international rivalry," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 464-468.
    • Handle: RePEc:eee:reveco:v:80:y:2022:i:c:p:464-468
    DOI: 10.1016/j.iref.2022.02.013
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    1. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
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    3. Victor J. Tremblay & Carol Horton Tremblay & Kosin Isariyawongse, 2013. "Endogenous Timing And Strategic Choice: The Cournot-Bertrand Model," Bulletin of Economic Research, Wiley Blackwell, vol. 65(4), pages 332-342, October.
    4. John Gilbert & Onur A. Koska & Reza Oladi, 2022. "International trade, differentiated goods, and strategic asymmetry," Southern Economic Journal, John Wiley & Sons, vol. 88(3), pages 1178-1198, January.
    5. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    6. Tremblay, Carol Horton & Tremblay, Victor J., 2011. "The Cournot-Bertrand model and the degree of product differentiation," Economics Letters, Elsevier, vol. 111(3), pages 233-235, June.
    7. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-258, March.
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    More about this item

    Keywords

    Exports vs. FDI; Horizontal product differentiation; Cournot–Bertrand–Nash equilibrium;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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