Employment protection and globalisation in dynamic oligopoly
Dewit, Dr. Gerda and Leahy, Dermot and Montagna, Catia (2003) Employment protection and globalisation in dynamic oligopoly. .
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 adjustment or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that location is influenced by both flexiblity 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.
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