 Collusion with Fluctuating Exchange Rates: A NoteInternational Journal of the Economics of Business, 2004, vol. 11, issue 1, 107-116 Abstract: A fluctuating exchange rate has an impact on how firms value a given stream of profits, thereby affecting the ability of an international oligopoly to collude implicitly. The conversion effect arises because the foreign firm maximizes its profits earned on the home market measured in foreign currency. The discount factor effect captures the fact that exchange rate fluctuations are connected with fluctuations in the interest rates, thereby changing the present value of future profits. Although each effect refers to only one of the firms, considered together they have an identical impact on the home and the foreign firm. If the foreign country is small, the conversion effect and the discount factor effect exactly offset each other. Otherwise, the effects analysed make collusion more difficult to sustain. Keywords: Implicit Collusion; International Oligopoly; Fluctuating Exchange Rate; D43; F12; L13 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:ijecbs:v:11:y:2004:i:1:p:107-116 Ordering information: This journal article can be ordered from DOI: 10.1080/1357151032000172264 Access Statistics for this article International Journal of the Economics of Business is currently edited by Eleanor Morgan More articles in International Journal of the Economics of Business from Taylor & Francis Journals |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.