TY - UNPB

T1 - The Proximity-Concentration Trade-Off under Goods Price and Exchange Rate Uncertainty

AU - Yalcin, Erdal

PY - 2008

Y1 - 2008

N2 - 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.

AB - 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.

KW - Export

KW - FDI

KW - Uncertainty

KW - Real option approach

M3 - Working paper

SN - 9788778822871

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

PB - Aarhus School of Business, Aarhus University, Department of Economics

CY - Aarhus

ER -