Tariff Policy and the Foreign Entry Decision in the Presence of a Cost-Based Informational Asymmetry
The paper demonstrates that the standard prediction on the relation between tariff rates and the mode of foreign entry—exports or direct investment—may not hold in the presence of incomplete information. A foreign firm lacks full information on the cost structure of an informed incumbent firm locate...
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| Veröffentlicht in: | Review of international economics 2003-11, Vol.11 (5), p.845-859 |
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| container_title | Review of international economics |
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| creator | Herander, Mark G. Kamp, Brad |
| description | The paper demonstrates that the standard prediction on the relation between tariff rates and the mode of foreign entry—exports or direct investment—may not hold in the presence of incomplete information. A foreign firm lacks full information on the cost structure of an informed incumbent firm located in the domestic (potential) host country. Within a two‐period model, the local incumbent may behave in a manner which keeps the potential foreign entrant uninformed of its cost structure. In such a pooling equilibrium, the uninformed foreign firm either refrains from entering altogether or serves the host country via exports at tariff rates which would, otherwise under complete information, induce entry via direct investment. When entry mode is altered, other standard full‐information effects of trade policy may also no longer hold. |
| doi_str_mv | 10.1046/j.1467-9396.2003.00421.x |
| format | Article |
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When entry mode is altered, other standard full‐information effects of trade policy may also no longer hold.</description><subject>Asymmetric information</subject><subject>Economic models</subject><subject>Economic theory</subject><subject>Economics</subject><subject>Exports</subject><subject>Foreign direct investment</subject><subject>Globalization</subject><subject>Host country</subject><subject>Information</subject><subject>International economics</subject><subject>International trade</subject><subject>Market entry</subject><subject>Studies</subject><subject>Tariff policy</subject><subject>Tariffs</subject><issn>0965-7576</issn><issn>1467-9396</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2003</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><recordid>eNqNkEtvEzEUhUcIJELLf7BYsJvB78eCRQlpSFrRqiplaTmOhzrMjFN7UjL_HidTZcGKxbEt3_MdXZ2iAAhWCFL-aVMhykWpiOIVhpBUEFKMqv2rYnIavC4mUHFWCib42-JdShsIEZMKTor1vYm-rsFtaLwdgOnWoH904DJE5391YNb1cQBfnfXJhw747ji9jS65zjoQamDANKS-_GKSW4NFV4fYmj57TQMu0tC2LgecF29q0yT3_uU-K35czu6n38rrm_lienFdWsoQKrHCFuHVShIDBVJQSckEJMZxCyWW1NawRhYJilS2E4VqaCGz0lDGV4wTclZ8HHO3MTztXOp165N1TWM6F3ZJEyFhTsTZ-OEf4ybsYt45aYwx4RgLmk1yNNkYUoqu1tvoWxMHjaA-dK83-lCxPlSsD93rY_d6n9HliEa3dfbErRoT3bPPP8-aGITyMWQdUWJ8FsvaZknKtGRKP_ZtDvs8hv3xjRv-ewl9d7OY5Vfmy5H3qXf7E2_ib80FEUz__D7XVw9LOn-4u9JL8hfir7Cf</recordid><startdate>200311</startdate><enddate>200311</enddate><creator>Herander, Mark G.</creator><creator>Kamp, Brad</creator><general>Blackwell Publishing Ltd</general><general>Wiley Blackwell</general><scope>BSCLL</scope><scope>DKI</scope><scope>X2L</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>200311</creationdate><title>Tariff Policy and the Foreign Entry Decision in the Presence of a Cost-Based Informational Asymmetry</title><author>Herander, Mark G. ; Kamp, Brad</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c4511-292c12bb83a071909885703ae6c08284cf0f1c17419511391f0c05c8a456b5633</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2003</creationdate><topic>Asymmetric information</topic><topic>Economic models</topic><topic>Economic theory</topic><topic>Economics</topic><topic>Exports</topic><topic>Foreign direct investment</topic><topic>Globalization</topic><topic>Host country</topic><topic>Information</topic><topic>International economics</topic><topic>International trade</topic><topic>Market entry</topic><topic>Studies</topic><topic>Tariff policy</topic><topic>Tariffs</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Herander, Mark G.</creatorcontrib><creatorcontrib>Kamp, Brad</creatorcontrib><collection>Istex</collection><collection>RePEc IDEAS</collection><collection>RePEc</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Review of international economics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Herander, Mark G.</au><au>Kamp, Brad</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Tariff Policy and the Foreign Entry Decision in the Presence of a Cost-Based Informational Asymmetry</atitle><jtitle>Review of international economics</jtitle><date>2003-11</date><risdate>2003</risdate><volume>11</volume><issue>5</issue><spage>845</spage><epage>859</epage><pages>845-859</pages><issn>0965-7576</issn><eissn>1467-9396</eissn><abstract>The paper demonstrates that the standard prediction on the relation between tariff rates and the mode of foreign entry—exports or direct investment—may not hold in the presence of incomplete information. 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| identifier | ISSN: 0965-7576 |
| ispartof | Review of international economics, 2003-11, Vol.11 (5), p.845-859 |
| issn | 0965-7576 1467-9396 |
| language | eng |
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| source | RePEc; EBSCOhost Business Source Complete; Access via Wiley Online Library |
| subjects | Asymmetric information Economic models Economic theory Economics Exports Foreign direct investment Globalization Host country Information International economics International trade Market entry Studies Tariff policy Tariffs |
| title | Tariff Policy and the Foreign Entry Decision in the Presence of a Cost-Based Informational Asymmetry |
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