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Risky Business: Intra-Firm Trade with Foreign Commercial Risk and Asymmetric Insurance

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  • Gerda Dewit

Abstract

A partial equilibrium model is used to examine the international production allocation of a two-plant risk averse multinational firm which is confronted with uncertainty with respect to foreign sales. The firm has price-discriminating monopoly power in both markets and uses specific factors in both plants, producing an identical good. We focus on the question how unequal insurance facilities in the firm’s home and host market influence the firm’s international production decision and its level of intra-firm trade.

Suggested Citation

  • Gerda Dewit, 1998. "Risky Business: Intra-Firm Trade with Foreign Commercial Risk and Asymmetric Insurance," Working Papers 9808, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:9808
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    References listed on IDEAS

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