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"It's Not You, It's Me": Prices, Quality, and Switching in U.S.-China Trade Relationships

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  • Ryan Monarch

Abstract

Costs from switching suppliers can affect prices by discouraging buyer movements from high- to low-cost sellers. This paper uses confidential data on U.S. importers and their Chinese exporters to investigate these costs. I find barriers to supplier adjustments: nearly half of importers keep their partner over time. Importers switch less if their supplier offers higher quality or provides lower prices. I propose and structurally estimate a dynamic discrete choice model to compute switching costs. Cost estimates are large, heterogeneous across products, and matter for trade prices: halving switching costs reduces the U.S.-China Import Price Index by 7.6%.

Suggested Citation

  • Ryan Monarch, 2022. ""It's Not You, It's Me": Prices, Quality, and Switching in U.S.-China Trade Relationships," The Review of Economics and Statistics, MIT Press, vol. 104(5), pages 909-928, December.
    • Handle: RePEc:tpr:restat:v:104:y:2022:i:5:p:909-928
    DOI: 10.1162/rest_a_01015
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    Cited by:

    1. Kossi Messanh Agbekponou & Ilaria Fusacchia, 2023. "Global value chains' position and value capture: Firm evidence in agri-food industry," Post-Print hal-04321612, HAL.
    2. Kossi Messanh Agbekponou & Ilaria Fusacchia, 2023. "Global value chains' position and value capture: Firm evidence in agri-food industry," Post-Print hal-04321670, HAL.

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