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The flood that caused a drought

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  • Alex Nikolsko‐Rzhevskyy
  • Oleksandr Talavera
  • Nam Vu

Abstract

To determine how an exogenous supply shock affects product availability, prices, and price‐setting behavior, we analyzed a unique dataset representing a natural experiment concerning the 2011 flood in Thailand, which affected the production facilities of Western Digital, the world's largest producer of hard drives. The natural disaster impacted the overseas inventory of hard drives in the United States, where availability declined by more than 40% and price indexes increased by as much as 38%. However, our findings suggest that such supply shocks, when transmitted to either substitute or complementary products, are likely to be absorbed within production networks.

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  • Alex Nikolsko‐Rzhevskyy & Oleksandr Talavera & Nam Vu, 2023. "The flood that caused a drought," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 965-981, October.
    • Handle: RePEc:bla:ecinqu:v:61:y:2023:i:4:p:965-981
    DOI: 10.1111/ecin.13144
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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