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Dewit, Gerda and Leahy, Dermot (2018) Attracting Foreign Direct Investment in Infrastructure. Working Paper. Department of Economics, Finance & Accounting Working Paper N290-18. (Unpublished)
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Abstract
We examine optimal policy of a host developing country towards a foreign firm that
can provide local infrastructure. In the main model, two types of infrastructural goods, one
provided by the foreign firm and the other by a publicly owned firm, are complementary inputs
for a domestic competitive final goods sector. We show that, due to strategic interaction
between the infrastructure providers, average-cost pricing, though inferior for the consumer, is
superior to marginal-cost pricing from an overall welfare perspective. In addition, when the
home firm maximises profit, domestic surplus is maximised, but the domestic consumer loses
from this.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Keywords: | Developing Countries; Infrastructure; Foreign Direct Investment; Complementarities; Pricing Game; Regulatory Policies; Working Paper N290-18; |
| Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
| Item ID: | 9710 |
| Depositing User: | Ms Sandra Doherty |
| Date Deposited: | 24 Jul 2018 16:02 |
| Publisher: | Department of Economics, Finance & Accounting Working Paper N290-18 |
| Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
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