A Bargaining Theory of Trade Invoicing and Pricing

Linda Goldberg and Cédric Tille

No 08-2013, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: We develop a theoretical model of international trade pricing in which individual exporters and importers bargain over the transaction price and exposure to exchange rate fluctuations. We find that the choice of price and invoicing currency respects the full market structure, including the extent of fragmentation and the degree of heterogeneity across importers and across exporters. Our study shows that a party has a higher effective bargaining weight when it is large or more risk tolerant. A higher effective bargaining weight of importers relative to exporters in turn translates into lower import prices and greater exchange rate passthrough into import prices. We show the range of price and invoicing outcomes that arise under alternative market structures. Such structures matter not only for the outcome of specific exporter-importer transactions, but also for aggregate variables such as the average price, the average choice of invoicing currency, and the correlation between invoicing currency and the size of trade transactions.

Keywords: currency; invoicing; exchange rate (search for similar items in EconPapers)
Pages: 57 pages
Date: 2013-04-13
New Economics Papers: this item is included in nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP09-2013.pdf (application/pdf)

Related works:
Working Paper: A bargaining theory of trade invoicing and pricing (2013)
Working Paper: A bargaining theory of trade invoicing and pricing (2013)
Working Paper: A bargaining theory of trade invoicing and pricing (2013)
Working Paper: A Bargaining Theory of Trade Invoicing and Pricing (2013)
Working Paper: A bargaining theory of trade invoicing and pricing (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp09-2013

Access Statistics for this paper

More papers in IHEID Working Papers from Economics Section, The Graduate Institute of International Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dorina Dobre ().