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International Price Dispersion and Market Segmentation in Japan and the United States: Theory and Empirics

Author

Listed:
  • Fung, Kwok-Chiu

    (Asian Development Bank Institute)

  • Garcia-Herrero, Alicia

    (Asian Development Bank Institute)

  • Ng, Francis

    (Asian Development Bank Institute)

Abstract

This paper focuses on the pricing behavior of Japanese and United States firms selling their identical products in New York City, Chicago, Osaka, and Tokyo. The authors utilize some simple models of international price dispersion and market segmentation that generate predictions about testable prices. The dataset, which consists of prices of identical products in the Japanese and American cities, was collected and accepted by both governments. Using this data, versions of international price dispersion theories are tested and some empirical evidence to support the view that simple international price dispersion models can partly explain the observed prices is found.

Suggested Citation

  • Fung, Kwok-Chiu & Garcia-Herrero, Alicia & Ng, Francis, 2013. "International Price Dispersion and Market Segmentation in Japan and the United States: Theory and Empirics," ADBI Working Papers 417, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0417
    as

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    References listed on IDEAS

    as
    1. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
    2. Cabolis, Christos & Clerides, Sofronis & Ioannou, Ioannis & Senft, Daniel, 2007. "A textbook example of international price discrimination," Economics Letters, Elsevier, vol. 95(1), pages 91-95, April.
    3. Nathalie Aminian & KC Fung & Alicia Garcia-Herrero & Chelsea C Lin, 2007. "The Political Economy of Exchange Rates: The Case of the Japanese Yen," Working Papers 0702, BBVA Bank, Economic Research Department.
    4. Bernhofen, Daniel M., 1999. "Intra-industry trade and strategic interaction: Theory and evidence," Journal of International Economics, Elsevier, vol. 47(1), pages 225-244, February.
    5. Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, November.
    6. K. C. Fung, 1991. "Collusive Intra-industry Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 391-404, May.
    7. Fung, K. C., 2002. "International Trade and Bank Groups: Welfare Enhancing or Welfare Reducing?," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 212-226, June.
    8. Philipp Maier, 2010. "An Analysis Of International Price Differentials On Ebay," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 307-321, July.
    9. K.C. Fung, 1991. "Characteristics of Japanese Industrial Groups and Their Potential Impact on U. S . - Japanese Trade," NBER Chapters,in: Empirical Studies of Commercial Policy, pages 137-168 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    pricing behavior; price dispersion; price dispersion theories; international price dispersion;

    JEL classification:

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

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