Demand Uncertainty, Perfect Competition
نویسنده
چکیده
Foreign direct investment (FDI) brings host countries capital, productive facilities, and technology transfers, as well as new jobs and management expertise. Thus, it is important to understand the basic reasons for FDI inflow and make clear what gains from FDI are. In the present paper, based on theoretical findings we formulate clear message stating that inflow of FDI does not need to be explained by any specific factor such as e.g., location advantage or ownership advantage, but it is a natural process driven by rational behavior of firms operating in perfectly competitive markets in uncertain environment. It is shown in a novel setting that flow of FDI between similar – even identical – countries with perfectly competitive markets is possible and can be welfare improving, despite obvious losses due to higher transaction/management costs in foreign plants. JEL Classification: F15, F23, P20, C23.
منابع مشابه
Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty
Applying a framework of perfect competition under uncertainty, we contribute to the discussion of whether or not ad valorem taxes and specific taxes are equivalent. While this equivalence holds without price uncertainty, we show that ad valorem taxes and specific taxes are “almost never” equivalent in the presence of uncertainty if we demand equivalence to hold pathwise. Since we obtain this re...
متن کاملJoint optimization of pricing and capacity allocation for two competitive airlines under demand uncertainty
Nowadays, airline industries should overcome different barriers regarding the fierce competition and changing consumer behavior. Thus, they attempt to focus on joint decision making which enables them to set pricing and capacity allocation to maximize their profits. In this research, we develop a model to optimize pricing and capacity allocation in a duopoly of single-flight leg for two competi...
متن کاملResearch Note - Cost Uncertainty Is Bliss: The Effect of Competition on the Acquisition of Cost Information for Pricing New Products
For competing firms, we examine the optimal acquisition of information about a common uncertain cost factor to price a new product and the implications of this acquisition for different parties. We show that findings for the acquisition of demand information or the acquisition of either cost or demand information for quantity decisions do not extend to this case. For cost information with price...
متن کاملPrice Versus Production Postponement: Capacity and Competition
This article presents a comparative analysis of possible postponement strategies in a two-stage decision model where firms make three decisions: capacity investment, production (inventory) quantity, and price. Typically, investments are made while the demand curve is uncertain. The strategies differ in the timing of the operational decisions relative to the realization of uncertainty. We show h...
متن کاملارزیابی قابلیت اطمینان تولید در بازار برق رقابتی کامل
Deregulation policy has caused some changes in the concepts of power system reliability assessment. This paper deals with generation reliability evaluation in perfect competition power market using market economic concepts and its dynamic. Also, because of power markets and generators’ forced outages stochastic behavior, Monte Carlo Simulation (MCS) is used in this research. Generation reliabil...
متن کاملReply to “ Do Returns Policies Intensify Retail Competition ? ”
R policies are common in many sectors of retail distribution. Padmanabhan and Png (1997) showed that with demand uncertainty, a returns policy could improve manufacturer profitability under certain conditions. Wang (2004) showed that returns policies do not change manufacturer profitability when demand is certain and retailing is competitive. We show that returns policies do increase manufactur...
متن کامل