Abstract
ABSTRACT The purpose of this paper is to investigate the weight of uncertainty on a firm''s decision to enter a foreign/domestic market. A game is designed between two symmetrical firms entering a market (Cournot quantity game). In addition, we explore the time of entry with one firm becoming a Stackelberg leader, and the other firm a follower. We find that multiple equilibria exist, and the firm''s decision does not necessarily depend on demand uncertainty. Rather it depends upon cost differentials, and behavior is exogenous. This implies that firms deciding to enter a market after the Covid 19 pandemic will be the ones who have come up with innovative ways to cut operating costs and firms that by nature do not face significantly fixed (and sunk) costs. The paper provides a contribution to the existing literature regarding a firm''s behavior to enter a foreign market. In this way, a fundamental contribution had been done to explaining foreign direct investment. Keywords Cournot game, Stackelberg game, Foreign Direct Investment, Uncertain Demand, Real Option.
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