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Two-Sided Market Power in Firm-to-Firm Trade

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Listed:
  • Alviarez Vanessa
  • Fioretti Michele
  • Kikkawa Ken
  • Morlacco Monica

Abstract

This paper develops a theory of bargaining in firm-to-firm trade with two-sided market power. The framework accommodates flexible market structures, yielding analytical expressions for pair-specific markups and pass-through elasticities. In U.S. import data, we estimate strong importer bargaining power and an upward-sloping export supply curve, consistent with oligopsony power. Pass-through of the 2018 tariffs in firm-to-firm relationships is incomplete, in contrast to product-level studies, primarily due to exporter cost reductions driven by falling demand from dominant buyers. Our study highlights how bargaining and network rigidities shape price outcomes, with implications for markup dispersion and shock propagation in global value chains.

Suggested Citation

  • Alviarez Vanessa & Fioretti Michele & Kikkawa Ken & Morlacco Monica, 2025. "Two-Sided Market Power in Firm-to-Firm Trade," Papers 2507.12848, arXiv.org.
    • Handle: RePEc:arx:papers:2507.12848
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Malik Curuk & Jérôme Héricourt & Gonzague Vannoorenberghe, 2025. "Labor Market Power, Export Prices and Pass-through," Working Papers 2025-15, CEPII research center.
    2. Eaton, Jonathan & Eslava, Marcela & Jinkins, David & Krizan, C.J. & Tybout, James, 2025. "A search and learning model of export dynamics," Journal of International Economics, Elsevier, vol. 157(C).
    3. Dhyne, Emmanuel & Kikkawa, Ayumu Ken & Kong, Xianglong & Mogstad, Magne & Tintelnot, Felix, 2023. "Endogenous production networks with fixed costs," Journal of International Economics, Elsevier, vol. 145(C).
    4. Felipe Brugués, 2026. "Take the Goods and Run: Contracting Frictions and Market Power in Supply Chains," American Economic Review, American Economic Association, vol. 116(2), pages 582-626, February.
    5. Huang, Hanwei & Manova, Kalina & Perello, Oscar & Pisch, Frank, 2024. "Firm heterogeneity and imperfect competition in global production networks," LSE Research Online Documents on Economics 126808, London School of Economics and Political Science, LSE Library.
    6. Michele Fioretti & Junnan He & Jorge Tamayo, 2024. "Prices and Concentration: A U-Shape? Theory and Evidence from Renewables," Working Papers hal-04631762, HAL.
    7. Vanessa Alviarez & Michele Fioretti & Ken Kikkawa & Monica Morlacco, 2025. "Concentration and Markups in International Trade," CESifo Working Paper Series 12046, CESifo.
    8. Li, Yao Amber & Lu, Lingfei & Zhao, Tengyu, 2025. "Exchange rate pass-through and importers’ credit constraints: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    9. Alessandro Ferrari & Andreas Freitag & Eric Kammerlander & Sarah Lein & Frank Pisch, 2026. "Exchange-rate pass-through and invoicing currency choice in international production networks," CEP Discussion Papers dp2154, Centre for Economic Performance, LSE.
    10. Fujiy,Brian C. & Ghose,Devaki & Khanna,Gaurav, 2024. "Production Networks and Firm-level Elasticities of Substitution," Policy Research Working Paper Series 10782, The World Bank.
    11. Kossi Messanh Agbekponou & Ilaria Fusacchia, 2024. "Positioning and bargaining power in agri-food global value chains," Post-Print hal-04666067, HAL.
    12. Kossi Messanh Agbekponou & Ilaria Fusacchia, 2024. "Positioning and bargaining power in agri-food global value chains," Post-Print hal-04666053, HAL.
    13. Conteduca, Francesco Paolo & Panon, Ludovic, 2024. "Natural Disasters and Markups," MPRA Paper 125324, University Library of Munich, Germany.
    14. Kossi Messanh Agbekponou & Ilaria Fusacchia, 2023. "Global value chains' position and value capture: Firm evidence in agri-food industry," Post-Print hal-04321612, HAL.
    15. Toraubally, Waseem A., 2023. "Comparative advantage with many goods: New treatment and results," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1188-1201.
    16. Kossi Messanh Agbekponou & Ilaria Fusacchia, 2023. "Global value chains' position and value capture: Firm evidence in agri-food industry," Post-Print hal-04321670, HAL.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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