A game theoretic-model of multinational firm location

José Pontes

No 2000/02, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: The paper deals with a location game involving two symmetric firms. The players choose strategies in a spatial setting made up by two asymmetric countries,where the smallest country has a labour cost advantage. Determination of equilibrium location patterns enables to assess under what conditions both forms of foreign direct investment (horizontal and vertical) will take place in terms of a set of parameters (namely market size, relative size of the small country, and extent of its cost advantage). The firms interact through input transactions that bring about multiplicity of equilibria. An application to the evolution of the Portuguese car industry is performed.

Keywords: Multinationals; Firm location; Noncooperative games; New economic geography (search for similar items in EconPapers)
JEL-codes: C72 F23 R30 (search for similar items in EconPapers)
Date: 2000
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Working Paper: A GAME THEORETIC MODEL OF MULTINATIONAL FIRM LOCATION (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp22000

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