We derive the sub-game perfect Nash equilibria for the foreign direct investment (FDI) game played between two unionized firms. We show that FDI is less likely, ceteris paribus, the greater is union bargaining power and the more substitutable are the firms' products in the potential host country. We also examine the conditions under which the FDI game between firms will possess the characteristics of a Prisoners' Dilemma.
Foreign direct investment and wage bargaining / R. Naylor, M. Santoni. - In: THE JOURNAL OF INTERNATIONAL TRADE ECONOMIC DEVELOPMENT. - ISSN 0963-8199. - 12:1(2003), pp. 1-18. [10.1080/0963819032000049178]
Foreign direct investment and wage bargaining
M. SantoniUltimo
2003
Abstract
We derive the sub-game perfect Nash equilibria for the foreign direct investment (FDI) game played between two unionized firms. We show that FDI is less likely, ceteris paribus, the greater is union bargaining power and the more substitutable are the firms' products in the potential host country. We also examine the conditions under which the FDI game between firms will possess the characteristics of a Prisoners' Dilemma.
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