Intraindustry Investment, and Welfare"
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This paper examines how
two international firms compete non-cooperatively by
choosing domestic sale, export, and overseas investment,
and investigates conditions for simultaneous existence of
intraindustry trade and intraindustry investment. The
roles of transport costs, market disadvantage, and
tariff, and whether intraindustry trade and intraindustry
are substitutes are explicitly analyzed. This paper
determines the possibility of gains from trade and
investment, and shows that in the presence of free trade,
further allowing free investment is always beneficial.
Competition between the firms in the long run in terms of
input advantage is analyzed in a three-stage game.
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