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The Proximity-Concentration Trade-Off under Goods Price and Exchange Rate Uncertainty

Research output: Working paperResearch

Documents

  • WP 08-3

    Final published version, 462 KB, PDF document

  • Erdal Yalcin, Denmark
The underlying model combines the proximity-concentration trade-o? framework with the real option approach. In contrast to the latest trade models, uncertainty is introduced as a continuous phenomenon. Furthermore, the model contains the innovation of comparing two option values simultaneously. The implementation of goods price uncertainty turns out to reduce the probability of entering a new market as an exporter. FDI becomes the optimal entry mode with increasing uncertainty. Additionally, the model is extended by implementing exchange rate uncertainty in a period of appreciation.
Original languageEnglish
Place of publicationAarhus
PublisherAarhus School of Business, Aarhus University, Department of Economics
Number of pages59
ISBN (Print)9788778822871
ISBN (Electronic)9788778822888
Publication statusPublished - 2008

    Research areas

  • Export, FDI, Uncertainty, Real option approach

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