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Pricing-To-Market: Exploring New Export Price Equations For The Link Model

In: Link Proceedings 1991, 1992 Selected Papers from Meetings in Moscow, 1991, and Ankara, 1992

Author

Listed:
  • BYRON GANGNES

    (Department of Economics, University of Hawaii at Manoa, 2424 Maile Way, Room 542, Honolulu, Hawaii 96822, USA)

  • HUNG-YI LI

    (Project LINK Research Centre, Institute for Policy Analysis, 140 St. George Street, Toronto, Ontario, M5S 3G6, CANADA)

  • PETER PAULY

    (Project LINK Research Centre, Institute for Policy Analysis, 140 St. George Street, Toronto, Ontario, M5S 3G6, CANADA)

Abstract

This paper describes preliminary work on respecification of the trade price linkages used in the global system of Project LINK. The basic feature of the approach is the focus on deviations from the competitive market paradigm: Exporting firms have market power and establish prices abroad depending on conditions in foreign markets, including perceived demand for their product, the extent and nature of competition, and perhaps strategic considerations affecting future market share. Such “pricing to market” results in incomplete pass-through of exchange rate and other cost changes. After briefly reviewing the issues, we present some exploratory empirical evidence on pricing behavior among LINK countries. While the first results are encouraging, it remains to be seen whether a similar approach can be implemented successfully using the more disaggregated trade data set soon to be incorporated into the LINK model.

Suggested Citation

  • Byron Gangnes & Hung-Yi Li & Peter Pauly, 1998. "Pricing-To-Market: Exploring New Export Price Equations For The Link Model," World Scientific Book Chapters, in: Bert G Hickman & Lawrence Klein (ed.), Link Proceedings 1991, 1992 Selected Papers from Meetings in Moscow, 1991, and Ankara, 1992, chapter 17, pages 331-351, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812816870_0017
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