Question
Vertical Foreign Direct Investment Use the two-country model of vertical FDI to answer the following questions. Assume thatau=5,as=1,bu=1,bs=10, wu1=10, ws1=20, wu2=2, ws2=30,b=0.35, and=0.2. What is
Vertical Foreign Direct Investment
Use the two-country model of vertical FDI to answer the following questions. Assume thatau=5,as=1,bu=1,bs=10, wu1=10, ws1=20, wu2=2, ws2=30,b=0.35, and=0.2.
What is the optimal firm structure?
A.Partial Fragmentation
B.Complete Fragmentation
C.HFDI
D.Export
2.Suppose economic development in country 2 increases the unskilled wage rate to wu2=4.
What is the optimal firm structure?
A.Partial Fragmentation
B.Complete Fragmentation
C.HFDI
D.Export
3.How large doesw2uneed to be for the firm to prefer exporting to other firms structures?
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Managerial economics
Authors: william f. samuelson stephen g. marks
7th edition
9781118214183, 1118041585, 1118214188, 978-1118041581
