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Frictions and adjustments in firm-to-firm trade

Author

Listed:
  • Fontaine, François
  • Martin, Julien
  • Méjean, Isabelle

Abstract

We develop a quantitative model of firm-to-firm trade in which search frictions, and comparative advantage jointly determine the structure of trade networks. Under Bertrand competition, the model produces heterogeneous prices and markups both across and within trade relationships over time. We estimate the model's parameters using a structural approach that leverages importer mobility across potential input suppliers for identification. We then use the model to study how shocks to suppliers propagate through the supply chain. Search frictions result in highly heterogeneous cost incidence, driven by within-relationship price adjustments and the reconfiguration of supply networks.

Suggested Citation

  • Fontaine, François & Martin, Julien & Méjean, Isabelle, 2023. "Frictions and adjustments in firm-to-firm trade," CEPR Discussion Papers 18110, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18110
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    Cited by:

    1. is not listed on IDEAS
    2. Alessandro Ferrari & Lorenzo Pesaresi, 2025. "Specialization, Complexity & Resilience in Supply Chains," Papers 2509.08981, arXiv.org, revised Jan 2026.
    3. Irene Iodice & Camille Reverdy & Irene Iodice, 2025. "Protection or Protectionism: The Effect of Technical Regulations on Input Sourcing," CESifo Working Paper Series 11829, CESifo.
    4. Laura Alfaro & Mariya Brussevich & Camelia Minoiu & Andrea F. Presbitero, 2025. "Bank Financing of Global Supply Chains," NBER Working Papers 33754, National Bureau of Economic Research, Inc.

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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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