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Exchange Rate Pass-Through in an International Duopoly model with Brand Loyalty

  • Chang Byoung-Ky
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    In many markets, consumers who have previously purchased from one firm have (or perceive) costs of switching to a competitor's product. This study explicitly analyzes, in an international duopoly model with brand loyalty, the effect of rival exchange rate on exchange rate pass-through. In the case of the imperfect foresight, the exchange rate pass-through is affected by the exchange rate uncertainty. Due to the brand loyalty, current price decisions will affect future profits through market shares. The expected future profit is affected by expected competition situations that depend on the interactive movement of future exchange rates. [F31, F12]

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    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 15 (2001)
    Issue (Month): 1 ()
    Pages: 41-59

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    Handle: RePEc:taf:intecj:v:15:y:2001:i:1:p:41-59
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    1. Marquez, Jaime, 1991. "The Dynamics of Uncertainty or the Uncertainty of Dynamics: Stochastic J-Curves," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 125-33, February.
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    8. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    9. Kenneth A. Froot & Paul Klemperer, 1988. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc.
    10. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
    11. Tivig, Thusnelda, 1996. "Exchange rate pass-through in two-period duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 631-645, July.
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    13. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
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