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Exchange Rate Pass-Through in an International Duopoly model with Brand Loyalty

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  • Chang Byoung-Ky
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    Abstract

    In many markets, consumers who have previously purchased from one firm have (or perceive) costs of switching to a competitor's product. This study explicitly analyzes, in an international duopoly model with brand loyalty, the effect of rival exchange rate on exchange rate pass-through. In the case of the imperfect foresight, the exchange rate pass-through is affected by the exchange rate uncertainty. Due to the brand loyalty, current price decisions will affect future profits through market shares. The expected future profit is affected by expected competition situations that depend on the interactive movement of future exchange rates. [F31, F12]

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730100000003
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 15 (2001)
    Issue (Month): 1 ()
    Pages: 41-59

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    Handle: RePEc:taf:intecj:v:15:y:2001:i:1:p:41-59

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    1. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
    2. repec:ltr:wpaper:1990.08 is not listed on IDEAS
    3. Kenneth A. Froot & Paul Klemperer, 1989. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc.
    4. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February.
    5. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
    6. Baron, David P, 1976. "Fluctuating Exchange Rates and the Pricing of Exports," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 425-38, September.
    7. Richard Baldwin, 1988. "Hysteresis In Import Prices: The Beachhead Effect," NBER Working Papers 2545, National Bureau of Economic Research, Inc.
    8. Robert C. Feenstra, 1987. "Symmetric Pass-Through of Tariffs and Exchange Rates Under Imperfect Competition: An Empirical Test," NBER Working Papers 2453, National Bureau of Economic Research, Inc.
    9. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
    10. Prema-chandra Athukorala, 1990. "Exchange Rate Pass Through: The Case of Korean Exports of Manufacturers," Working Papers 1990.08, School of Economics, La Trobe University.
    11. Fisher, Eric, 1989. "A model of exchange rate pass-through," Journal of International Economics, Elsevier, vol. 26(1-2), pages 119-137, February.
    12. Tivig, Thusnelda, 1996. "Exchange rate pass-through in two-period duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 631-645, July.
    13. Marquez, Jaime, 1991. "The Dynamics of Uncertainty or the Uncertainty of Dynamics: Stochastic J-Curves," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 125-33, February.
    14. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
    15. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
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