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Show me your competitors and I will tell you if you are exposed : Market Structure and Foreign Exchange Exposure

Author

Listed:
  • Andrikopoulos, Athanasios

    (Hull University Business School, University of Hull)

  • Dassiou, Xeni

    (Department of Economics, City, University of London)

Abstract

We examine the impact of exchange rates on profits and prices in differentiated consumable goods markets under imperfect competition. We model the exchange rate exposure of exporting firms operating within price and quantity settings where between and within competition co-exist. We show that these two forms of competition may act as opposing forces in terms of the impact of the exchange rate on the optimal prices (quantities) and profits in both Bertrand and Cournot models. Real and bilateral exchange rate exposure is empirically tested using stock price and profit data from twenty-two multinational firms from nine markets during 1984-2015.

Suggested Citation

  • Andrikopoulos, Athanasios & Dassiou, Xeni, 2016. "Show me your competitors and I will tell you if you are exposed : Market Structure and Foreign Exchange Exposure," CRETA Online Discussion Paper Series 25, Centre for Research in Economic Theory and its Applications CRETA.
    • Handle: RePEc:wrk:wcreta:25
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/creta/papers/manage/25_-_creta_andrikopoulos.pdf
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    More about this item

    Keywords

    Oligopoly Market Structure ; Differentiation ; Firm Behaviour ; Foreign Exchange ; International corporate finance JEL classification numbers: L13 ; D21 ; D22 ; F31 ; G39;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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