Multinational Learning under Asymmetric Information

Jain, N. & Mirman, L. J. (2001). Multinational Learning under Asymmetric Information. Southern Economic Journal, 67(3), pp. 637-655.

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The aim of this paper is to analyze the competition between a multinational and the incumbent firm in a foreign market under asymmetric information about demand and unobservable outputs. It is shown that the incumbent firm increases its production in the first period to signal to the multinational that the demand is low. The multinational reduces its output in the foreign market in order to signal-jam. In addition, the multinational increases its production in the other market. However, total production of the multinational is lower. Implications for research and development expenditure by the multinational are examined.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics

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