The strategic proximity-concentration trade-off with multiproduct multinational firms

Gaetano Alfredo Minerva

International Economics, 2023, vol. 174, issue C, 198-220

Abstract: I study the proximity-concentration trade-off faced by two multiproduct multinational companies (MNCs) that operate in two countries under horizontal product differentiation. In this context, characterized by two-way trade and foreign direct investment, the trade-off regulates the domestic stock of investment (concentration) against the foreign stock (proximity) in a way that is centred around the exploitation of large market shares and market power. I show that MNCs follow pricing-to-market that mirrors the proximity-concentration trade-off, and I characterize how market shares, prices, and markups react to changes in investment and trade frictions. Endogenous variables turn out to be closely interrelated across markets and firms.

Keywords: Foreign direct investment; Multiproduct firms; Multinational companies; Oligopoly; Pricing-to-market; Proximity-concentration (search for similar items in EconPapers)
JEL-codes: F12 F23 L11 L13 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:174:y:2023:i:c:p:198-220

DOI: 10.1016/j.inteco.2023.03.007

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