Exchange Rates and Pricing-To-Markets(PTM)

Rosung Kwak
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Rosung Kwak: Dongguk University

Korean Economic Review, 1996, vol. 12, issue 2, 187-197

Abstract: This paper sets up a model where firms, which sell their products both in domestic and foreign markets, preset price in terms of destination country currency, and where firms in the market produce dif)‘erentiated products. Using Spenee-Dixit-Stiglitz(S-D-S) type subutility function and Greens theorem the paper derives the demand for the firm's brandl domestic and export). The paper shows how PT M results when the changes of the exchange rate are uncertain i/'yfi'rms price their products following Leland( 1972)’s concepts of PIU and PDU.

Date: 1996
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