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Risky Business: Multinationals, Uncertainty and Asymmetric Insurance
Author(s) -
Dewit Gerda
Publication year - 2002
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00288
Subject(s) - multinational corporation , monopoly , production (economics) , business , industrial organization , microeconomics , economics , international trade , finance
A partial equilibrium model is used to examine the international production allocation of a two‐plant multinational firm that is confronted with uncertainty with respect to foreign sales. The firm produces identical products in both plants, using firm‐specific factors. The internationally price‐discriminating multinational has monopoly power in both segmented markets. The analysis focuses on how asymmetric insurance facilities between the firm’s home and host country influence its international production allocation and level of intra‐firm trade.