Naylor, Robin Andrew, 1959- and Santoni, Michele (1999) Foreign direct investment and wage bargaining. Working Paper. Coventry: University of Warwick. Centre for the Study of Globalisation and Regionalisation. (Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)).

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Abstract

We derive the sub-game perfect Nash equilibria for the foreign direct investment (FDI) game played between two unionised firms. Among other results, we show that FDI is less likely, ceteris paribus, the greater is union bargaining power, the stronger the weight the union attaches to wages, and the more substitutable are firms’ products in the potential host country. We derive results concerning the conditions under which FDI will be reciprocal. We also examine conditions under which the FDI game between firms will possess the characteristics of a Prisoners’ Dilemma. Finally, we consider the possibility that firms might delegate wage determination to unions as a method of strategic deterrence against entry by FDI.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HG Finance H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Economics Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation
Library of Congress Subject Headings (LCSH):	Investments, Foreign, Wage bargaining, Oligopolies, Labor unions, Equilibrium (Economics)
Series Name:	Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)
Publisher:	University of Warwick. Centre for the Study of Globalisation and Regionalisation
Place of Publication:	Coventry
Date:	October 1999
Number:	No.41/
Number of Pages:	28
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/2084

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