On the design of invoicing practices in international trade
We advance an explanation for the choice of the invoice currency of international trade contracts on the basis of strategic bargaining considerations. The choice of the invoice currency originates in a situation in which each trader takes into account the other party's bargaining power. The latter depends on the individual discount factor, whether one is the first or second proposer, and whether one is on the short or long side of the market. Along these lines we explain the Grassman bias for trade contracts to be invoiced in the exporter's currency. Copyright Kluwer Academic Publishers 1992
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- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
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- John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
- Black, Stanley W., 1985. "International money and international monetary arrangements," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 22, pages 1153-1193 Elsevier.
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"Equilibrium in a Market with Sequential Bargaining,"
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- Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
- Ethier, Wilfred, 1973. "International Trade and the Forward Exchange Market," American Economic Review, American Economic Association, vol. 63(3), pages 494-503, June.
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