This paper shows that investor-state dispute settlements (ISDS) make multinational firms more aggressive by increasing cost-reducing investments with the aim to enlarge the potential compensation an ISDS provision may offer. While a larger investment reduces the market distortion, it will also...

We analyze a non-cooperative two-country game where each government decides whether to allow free market entry of firms or to regulate market access. We show that a Pareto-efficient allocation may result in equilibrium. In particular, if the cost difference between home and foreign production is...