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Imperfect Competition in Firm-to-Firm Trade

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  • Emmanuel Dhyne
  • Glenn Magerman
  • Ayumu Ken kikkawa

Abstract

This paper studies the implications of imperfect competition in firm-to-firm trade. Using a dataset on all transactions between Belgian firms, we find that firms charge higher markups if they have higher input shares among their buyers. We build a model where firms charge different markups to buyers depending on the input shares they have in each buyer. The estimated model suggests large distortions due to double marginalization: Reducing all markups in firm-to-firm also highlight the importance of accounting for endogeneities in firm-to-firm markups in predicting the effects of shock transmissions.

Suggested Citation

  • Emmanuel Dhyne & Glenn Magerman & Ayumu Ken kikkawa, 2019. "Imperfect Competition in Firm-to-Firm Trade," Working Papers ECARES 2019-05, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/280981
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    Cited by:

    1. Gadenne, Lucie & Nandi, Tushar K. & Rathelot, Roland, 2019. "Taxation and Supplier Networks: Evidence from India," CAGE Online Working Paper Series 428, Competitive Advantage in the Global Economy (CAGE).
    2. Carvalho, Vasco M & Tahbaz-Salehi, Alireza, 2018. "Production Networks: A Primer," CEPR Discussion Papers 13421, C.E.P.R. Discussion Papers.
    3. Cajal-Grossi, Julia & Macchiavello, Rocco & Noguera, Guillermo, 2019. "International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments," CEPR Discussion Papers 13482, C.E.P.R. Discussion Papers.
    4. Grossi, Julia Cajal & Macchiavello, Rocco & Noguera, Guillermo, 2019. "International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments," CAGE Online Working Paper Series 403, Competitive Advantage in the Global Economy (CAGE).
    5. Gadenne, Lucie & Nandi, Tushar K. & Rathelot, Roland, 2019. "Taxation and Supplier Networks : Evidence from India," The Warwick Economics Research Paper Series (TWERPS) 1208, University of Warwick, Department of Economics.
    6. Julia Cajal-Grossi & Rocco Macchiavello & Guillermo Noguera, 2019. "International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments," CEP Discussion Papers dp1598, Centre for Economic Performance, LSE.
    7. Cédric Duprez & Glenn Magerman, 2019. "Price Updating with Production Networks," Working Papers ECARES 2019-07, ULB -- Universite Libre de Bruxelles.
    8. Cedric Duprez & Glenn Magerman, 2018. "Price Updating in Production Networks," Working Paper Research 352, National Bank of Belgium.

    More about this item

    Keywords

    Competition; Firm-to-Firm Trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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