An equilibrium analysis of the revenue-maximizing multinational enterprise

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 M...

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Bibliographic Details
Published in:Frontiers of economics in China 2008-09, Vol.3 (3), p.482-495
Main Author: Hu, Songhua
Format: Article
Language:English
Subjects:
Economics
Economics and Finance
Multinational corporations
Nonlinear programming
Research Article
Studies
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Summary: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.
ISSN:1673-3444
1673-3568
DOI:10.1007/s11459-008-0023-7