Two-Sided Market Power in Firm-to-Firm Trade

Vanessa Alvariez (), Michele Fioretti, Ken Kikkawa and Monica Morlacco
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Vanessa Alvariez: IDB - Inter-American Development Bank - Inter-American Development Bank

Working Papers from HAL

Abstract: We develop a quantitative theory of prices in firm-to-firm trade with bilateral negotiations and two-sided market power. Markups reflect oligopoly and oligopsony forces, with relative bargaining power as weight. Cost pass-through elasticities into import prices can be incomplete or complete, depending on the exporter's and importer's bargaining power and market shares. In U.S. import data, we find that U.S. importers have substantial market power and disproportionate leverage in price negotiations. The estimated model produces accurate predictions of the impact of Trump tariffs on pair-level prices. At the aggregate level, ignoring two-sided market power could exaggerate tariff pass-through by about 60%.

Date: 2022-12-30
New Economics Papers: this item is included in nep-com and nep-int
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03795736v2
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Related works:
Working Paper: Two-Sided Market Power in Firm-to-Firm Trade (2023)
Working Paper: Two-Sided Market Power in Firm-to-Firm Trade (2023)
Working Paper: Two-Sided Market Power in Firm-to-Firm Trade (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-03795736

DOI: 10.3386/w31253

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