We propose a simple ,odel to analyze the widespread idea that a necessary condtion from firms to make foreign direct investments is that thay have firm-pecific advantage with respect to host country firms.

This paper contributes to research endogenizing multinational firms in general equilibrium trade Models.

We propose a simple model to analyze the widespread idea that a necessary condition for firms to make foreign direct investments is that they have firm-specific advantages with respect to host country firms. We show that no such advantages are necessary to become multinationals. Further, firms...

We extend the literature on exclusive dealing, which assumes that entry can occur only by installing new capacity, by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive deals can be used to improve the incumbent's bargaining position in the...