Asymmetric oligopoly and foreign direct investment: implications for host-country tax-setting

We present a duopoly model with heterogeneous firms that vary in cost-efficiency, each of which can choose to serve a foreign market by either exporting or local production. We do so to analyse the effects of a host-country corporate profit tax on both the scale and composition of FDI, and find that: strategic interaction between oligopolistic firms provides for a pattern of FDI that favours cost-inefficiency to the detriment of host-country welfare; and the host-country tax rate can be optimally used to avoid such patterns of FDI and instead promote direct investment by a relatively cost-efficient firm.

Multiproduct activity in an experimental differentiated oligopoly

In a symmetric differentiated experimental oligopoly with multiproduct firms we test the predictive power of the corresponding Bertrand-Nash equilibria. Subjects are not informed on the specification of the underlying demand model. In the presence of intense multiproduct activity, and provided that a parallel pricing rule is imposed to multiproduct firms, strategies tend to confirm the non-cooperative multiproduct solution.