Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements?

Thierry Mayer, Keith Head and John Ries ()

No 3327, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Knickerbocker (1973) introduced ?oligopolistic reaction? to explain why firms follow rivals into foreign markets. We develop a model that incorporates central features of Knickerbocker's story-oligopoly, uncertainty, and risk aversion-to establish the conditions required to generate follow-the-leader behaviour. We find that rival foreign investment will make risk-neutral firms less inclined to move abroad once its rivals have done so. We show that the Knickerbocker prediction relies on risk aversion and derive an expression for the minimum amount of risk aversion needed to generate oligopolistic reaction.

Keywords: Oligopolistic reaction; Spatial cournot competition; Uncertainty (search for similar items in EconPapers)
JEL-codes: F23 R30 (search for similar items in EconPapers)
Date: 2002-04
New Economics Papers: this item is included in nep-ifn and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements (2002)
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements (2002)
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements (2001)
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements? (2000)
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements? (2000)
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements? (2000)
Working Paper: Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements? (2000)
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