Dundee Discussion Papers in Economics 137: Employment protection and globalisation in dynamic oligopoly

TY - UNPB

T1 - Dundee Discussion Papers in Economics 137

T2 - Employment protection and globalisation in dynamic oligopoly

AU - Dewit, Gerda

AU - Leahy, Dermot

AU - Montagna, Catia

PY - 2003

Y1 - 2003

N2 - We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexibility and strategic concerns. We show that the strategic effects under Cournot work towards domestic anchorage in the country with adjustment costs while those under Bertrand do not. Strategic agglomeration can occur in the inflexible country under Cournot and even under Bertrand provided uncertainty and foreign direct investment costs are low.

AB - We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexibility and strategic concerns. We show that the strategic effects under Cournot work towards domestic anchorage in the country with adjustment costs while those under Bertrand do not. Strategic agglomeration can occur in the inflexible country under Cournot and even under Bertrand provided uncertainty and foreign direct investment costs are low.

KW - Uncertainty

KW - Flexibility

KW - Oligopoly

KW - Employment protection

KW - Foreign direct investment

KW - Location

M3 - Discussion paper

T3 - Dundee Discussion Papers in Economics

BT - Dundee Discussion Papers in Economics 137

PB - University of Dundee

ER -