EconPapers    
Economics at your fingertips  
 

Optimal Regulation of Multinationals under Collusion

Bilgehan Karabay ()

The World Economy, 2017, vol. 40, issue 8, 1687-1706

Abstract: This paper analyses the optimal collusion†proof mechanism for the regulation of multinational firms (MNFs) in foreign direct investment (FDI) projects. There is a host country with a profitable investment opportunity. Either a multinational firm (MNF) or a local firm (LF) can undertake this project; nonetheless due to its firm†specific advantage, and the MNF has the potential to create a larger surplus. The host government faces an informational constraint such that it cannot observe the extra surplus the MNF can generate. Using this set†up, Karabay (2010) shows that employing foreign ownership restrictions to force a joint venture (JV) can help the host government to partially overcome its information disadvantage. In this paper, we extend Karabay (2010) by studying the host government's optimal regulatory policy when the MNF and the LF can collude. It turns out collusion imposes no cost on the host government and the expected welfare attained in the absence of collusion can still be secured under collusion.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/twec.12410

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:40:y:2017:i:8:p:1687-1706

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-10-21
Handle: RePEc:bla:worlde:v:40:y:2017:i:8:p:1687-1706