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Reputation and Learning: Japanese Car Exports to the United States

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  • Goksel, Turkmen

Abstract

This paper incorporates learning and reputation building into a simple dynamic stochastic model of international trade with asymmetric information. We use the model to study a bilateral trade flow influenced significantly by learning and reputation, namely U.S. imports of Japanese cars over the period 1961-2005. Numerical simulations replicate the trade flow in a robust fashion. In addition to matching this event, we explore further implications of our framework for understanding international trade patterns. Since learning and reputation building require time, predicted short run trade patterns can be quite different than those predicted in the long run. Sectorial differences in the speed of learning and reputation building affect predicted trade patterns. The extent of asymmetric information existing between importers and exporters also changes under different trade policies.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40805.

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Date of creation: Feb 2011
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Handle: RePEc:pra:mprapa:40805

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Keywords: international trade; reputation; learning; asymmetric information; automobile;

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  1. Stijn Van Nieuwerburgh & Laura Veldkamp, 2009. "Information Immobility and the Home Bias Puzzle," Journal of Finance, American Finance Association, vol. 64(3), pages 1187-1215, 06.
  2. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005. "Cultural Biases in Economic Exchange," CEPR Discussion Papers 4837, C.E.P.R. Discussion Papers.
  3. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-16, May.
  4. Feenstra, Robert C, 1988. "Quality Change under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 131-46, February.
  5. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  6. Falvey, Rodney E, 1989. "Trade, Quality Reputations and Commercial Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 607-22, August.
  7. Steve Tadelis, 1997. "What's in a Name? Reputation as a Tradeable Asset," Working Papers 97033, Stanford University, Department of Economics.
  8. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
  9. Levinsohn, J., 1993. "International Trade and the U.S. Automobile Industry: Current Research, Issues, and Questions," Working Papers 340, Research Seminar in International Economics, University of Michigan.
  10. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  11. Wojcik, Charlotte, 2001. "Learning by Consumers in the Demand for Japanese Cars," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 94-107, February.
  12. Joseph E. Gagnon & Michael M. Knetter, 1992. "Markup Adjustment and Exchange Rate Fluctuations: Evidence From Panel Data on Automobile Exports," NBER Working Papers 4123, National Bureau of Economic Research, Inc.
  13. James Levinsohn & Steven Berry & Ariel Pakes, 1999. "Voluntary Export Restraints on Automobiles: Evaluating a Trade Policy," American Economic Review, American Economic Association, vol. 89(3), pages 400-430, June.
  14. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
  15. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  16. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  17. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 857-882, December.
  18. Barber, Brad M. & Click, Reid W. & Darrough, Masako N., 1999. "The impact of shocks to exchange rates and oil prices on U.S. sales of American and Japanese automakers," Japan and the World Economy, Elsevier, vol. 11(1), pages 57-93, January.
  19. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  20. Kenneth E. Train & Clifford Winston, 2007. "Vehicle Choice Behavior And The Declining Market Share Of U.S. Automakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1469-1496, November.
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Cited by:
  1. Dilip Mookherjee & Pranab Bardhan & Masatoshi Tsumagari, 2011. "Middlemen Margins And Globalization," Boston University - Department of Economics - Working Papers Series WP2011-034, Boston University - Department of Economics.

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