Market size, product differentiation and bidding for new varieties

Jie Ma and Ian Wooton ()

International Tax and Public Finance, 2020, vol. 27, issue 2, No 1, 257-279

Abstract: Abstract We analyse a firm’s investment decision in a regional economy composed of two countries. The firm already manufactures a horizontally differentiated good in the region, and we determine the firm’s equilibrium location choice for the new good and the welfare consequences of fiscal competition between the two countries. We find that the firm’s location decision is efficient. Fiscal competition does not affect the location of production but merely redistributes rents between the firm and the taxpayers of the host country. As far as we know, the tax competition literature has not previously addressed the issue of product differentiation.

Keywords: FDI; Import substitution; Market size; MNEs; Product differentiation (search for similar items in EconPapers)
JEL-codes: F21 F23 H21 H25 L22 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Market Size, Product Differentiation and Bidding for New Varieties (2017)
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DOI: 10.1007/s10797-019-09559-4

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