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An equilibrium analysis of the revenuemaximizing
multinational enterprise |
| HU Songhua |
| Lingnan College, Sun Yat-sen University, Guangzhou 510275, China |
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Abstract Departing from the traditional profit-maximization assumption underlying the theory of the multinational enterprises (MNEs), this paper proposes a model of the revenue-maximizing MNE subject to the profit constraint. The nonlinear programming techniques are used for the equilibrium analysis of the MNE’s decision-making. A set of optimal conditions is derived regarding the quantity of output, volume of intra-firm trade, allocation of multinational production, as well as transfer prices in both exogenous and endogenous cases. Under the context, a comparison of the behavioral differences is made between the revenue-maximizing MNE and the profit-maximizing MNE.
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Issue Date: 05 September 2008
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