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Spatial Price Discrimination in International Markets

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  • Julien Martin

Abstract

This paper presents a theoretical discussion and an empirical investigation of the impact of distance on the spatial pricing policy of exporting firms. The theoretical part points out the importance of transport costs formulation to determine how distance impacts fob prices. Assuming additive or iceberg transport costs might imply opposite predictions concerning this relationship. The empirical analysis is based on French export data providing us with bilateral export unit values at the firm and product level. The main empirical result is that French exporters set higher prices toward the more remote markets. This finding goes against the predictions of the main models of international trade (with or without quality) predicting either a nil or a negative impact of distance on prices at the firm level. It also questions the use of iceberg transport costs. A way to reconcile theory with the data is to introduce additive transport costs.

Suggested Citation

  • Julien Martin, 2009. "Spatial Price Discrimination in International Markets," Working Papers 2009-21, CEPII research center.
  • Handle: RePEc:cii:cepidt:2009-21
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    References listed on IDEAS

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    More about this item

    Keywords

    Spatial price discrimination; Export prices; Distance; Firm level data;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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