Private Cost Information and the Multinational Enterprise

39 Pages Posted: 25 Jun 2004 Last revised: 7 Apr 2021

See all articles by Kyle Bagwell

Kyle Bagwell

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 1988

Abstract

This paper explores the informational role of plant location decisions for the multinational enterprise. When information about costs is incomplete, the location of a plant will be chosen not only for its impact on actual production costs, but also for Its impact on the perception of costs as held by foreign rivals. We show that the latter consideration, which can arise only in the presence of asymmetric information about costs, may lead to a decision to multinationalize even though actual production costs are higher as a result. As such, the informational role of plant location decisions is a potentially important element in understanding the behavior of the multinational firm.

Suggested Citation

Bagwell, Kyle and Staiger, Robert W., Private Cost Information and the Multinational Enterprise (July 1988). NBER Working Paper No. w2657, Available at SSRN: https://ssrn.com/abstract=315982

Kyle Bagwell (Contact Author)

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Robert W. Staiger

Stanford University ( email )

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University of Wisconsin - Madison - Department of Economics ( email )

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