Empirical evidence shows that an increase in trade liberalisation causes an increase in foreign direct investments (FDIs). Here we propose an explanation to this apparent puzzle by exploiting the intensity of competition in a Bertrand duopoly with convex costs where the two firms enter in a new...

Empirical evidence shows that an increase in trade liberalization causes an increase in foreign direct investments (FDIs). Here we propose an explanation to this apparent puzzle by exploiting the intensity of competition in a Bertrand duopoly with convex costs where the two firms enter in a new...