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Pricing to Firm: an Analysis of Firm- and Product-level Import Prices

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  • László Halpern
  • Miklós Koren

Abstract

We use Hungarian Customs data on product-level imports of manufacturing firms to document that the import price of a particular product varies substantially across buying firms. We relate the level of import prices to firm characteristics such as size, foreign ownership, and market power. We develop a theory of "pricing to firm" (PTF), where markups depend on the technology and competitive environment of the buyer. The predictions of the model are confirmed by the data: import prices are higher for firms with greater market power, and for more essential intermediate inputs (with a high share in material costs). We take account of the endogeneity of the buyer's market power with respect to higher import prices and unobserved cost heterogeneity within product categories. The magnitude of PTF is big: the standard deviation of price predicted by PTF is 21.5%. Copyright � 2007 The Authors; Journal compilation � 2007 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 15 (2007)
Issue (Month): 3 (08)
Pages: 574-591

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Handle: RePEc:bla:reviec:v:15:y:2007:i:3:p:574-591

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Cited by:
  1. Fabrice Defever, . "Incomplete Contracts and the Impact of Globalization on Consumer Welfare," Discussion Papers 11/08, University of Nottingham, GEP.
  2. Kugler, Maurice & Verhoogen, Eric, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," IZA Discussion Papers 3932, Institute for the Study of Labor (IZA).
  3. Thierry Mayer & Philippe Martin & Nicolas Berman, 2010. "How do different exporters react to exchange rate changes? Theory, empirics and aggregate implications," 2010 Meeting Papers 1338, Society for Economic Dynamics.
  4. Mallick, Sushanta & Marques, Helena, 2012. "Pricing to market with trade liberalization: The role of market heterogeneity and product differentiation in India’s exports," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 310-336.
  5. Laszlo Halpern & Miklos Koren & Adam Szeidl, 2005. "Import and Productivity," IEHAS Discussion Papers 0509, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  6. Pradyut Kumar Pyne & Saikat Sinha Roy, 2009. "Exchange Rate Pass-Through in India an Exploration with Sectoral Import Prices," DEGIT Conference Papers c014_038, DEGIT, Dynamics, Economic Growth, and International Trade.

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