MARKET-STRUCTURE AND THE MULTINATIONAL-ENTERPRISE - A GAME-THEORETIC APPROACH

Since at least the late 1950s, if has been recognized that multination al enterprises operate in imperfect markets characterized by oligopoly . The dominant ''transactions-cost'' theory of multinational enterpris es does not wholly account fdr why this is so. The reductio ad absurdu m of this theory would predict imperfect markets to be sure, but they would be monopolistic rather than oligopolistic. in this article, a si mple model based on noncooperative game theory shows how oligopolistic markets can involve from monopolistic ones. Also shown is that it is neither necessary nor sufficient that a firm have lower costs than its rivals in order to have an incentive to become multinational.