Revisiting Oligopolistic Reaction: Are FDI Decisions Strategic Complements?

Keith Head, Thierry Mayer and John Ries
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John Ries: Faculty of Commerce - University of British Columbia

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: Knickerbocker (1973) introduced "oligopolistic reaction" to explain why firms follow rivals into foreign markets. We develop a model that incorporates the 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 risk aversion can generate the Knickerbocker prediction 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 R3 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000-04
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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 (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)
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