Investment Liberalization in Aftermarket Services
This paper analyzes the aftermarket service industry in the context of international trade. It builds a two-country
international duopoly model to discuss the impacts of liberalization in service sector. Initially the service industry of home
country is blockaded from foreign firms. After trade liberalization in service, the foreign manufacturer is able to take foreign
direct investment (FDI) to offer services for its customers. Under the setting, I investigate the market outcome before and
after the liberalization. The study finds that, liberalization in service market would probably lead to a lower quality in
durable imports. It implies liberalization in service FDI may not necessarily benefit the consumers.
Keywords- Liberalization, FDI, Aftermarket Service