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Pricing to Firm: An Analysis of Firm- and Product-Level Import Prices

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  • Halpern, László
  • Koren, Miklós

Abstract

We use Hungarian Customs data on product-level imports and exports of manufacturing firms to document that the import price of a particular product varies substantially across buying firms. Importantly, we can 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 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. We show that even if unobserved cost heterogeneity within product categories is substantial, it is uncorrelated with our variables of interest. The magnitude of PTF is big: the standard deviation of price predicted by PTF is 21.5%.

Suggested Citation

  • Halpern, László & Koren, Miklós, 2004. "Pricing to Firm: An Analysis of Firm- and Product-Level Import Prices," CEPR Discussion Papers 4568, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4568
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    Cited by:

    1. Maurice Kugler & Eric Verhoogen, 2012. "Prices, Plant Size, and Product Quality," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 307-339.
    2. 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.
    3. Nicolas Berman & Philippe Martin & Thierry Mayer, 2009. "How do Different Exporters React to Exchange Rate Changes? Theory, Empirics and Aggregate Implications," Working Papers 2009-32, CEPII research center.
    4. Vandenbussche, Hylke & Viegelahn, Christian, 2018. "Input reallocation within multi-product firms," Journal of International Economics, Elsevier, vol. 114(C), pages 63-79.
    5. Fabrice Defever, 2011. "Incomplete Contracts and the Impact of Globalization on Consumer Welfare," CESifo Working Paper Series 3484, CESifo.
    6. Maurice Kugler & Eric Verhoogen, 2008. "The Quality-Complementarity Hypothesis: Theory and New Evidence from Colombia," CID Working Papers 183, Center for International Development at Harvard University.
    7. Laszlo Halpern & Miklos Koren & Adam Szeidl, 2005. "Import and Productivity," CERS-IE WORKING PAPERS 0509, Institute of Economics, Centre for Economic and Regional Studies.
    8. Mallick, Sushanta & Marques, Helena, 2010. "Data frequency and exchange rate pass-through: Evidence from India's exports," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 13-22, January.
    9. 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.
    10. repec:hal:spmain:info:hdl:2441/10221 is not listed on IDEAS

    More about this item

    Keywords

    Price discrimination; Import prices; pricing to firm;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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