The decision over exports vs. foreign direct investment (FDI) is usually discussed in an extension of the so-called Melitz model where firms with heterogeneous costs compete in a monopolistically competitive industry. The present paper starts from a situation where a potential foreign entrant...

The decision over exports vs. foreign direct investment (FDI) is usually discussed in an extension of the so-called Melitz model where firms with heterogeneous costs compete in a monopolistically competitive industry. The present paper starts from a situation where a potential foreign entrant...

Consider a market with switching costs that is initially served by a monopolistic incumbent. How can a competitor successfully enter this market? We show that an offer to undercut the incumbent by a fixed margin serves this purpose. This strategy dominates traditional entry where the entrant...

Consider a market with switching costs that is initially served by a monopolistic incumbent. How can a competitor successfully enter this market? We show that an offer to undercut the incumbent by a fixed margin serves this purpose. This strategy dominates traditional entry where the entrant...