Pricing-to-Market: Price Discrimination or Product Differentiation?

Nathalie Lavoie and Qihong Liu

American Journal of Agricultural Economics, 2007, vol. 89, issue 3, 571-581

Abstract: We employ a vertical differentiation model to examine the potential bias in pricing-to-market results when using export unit values aggregating differentiated products. Our results show that: (i) false evidence of pricing-to-market is always found when using unit values, whether the law of one price holds or not; and (ii) the size of the bias increases with the level of product differentiation. Our simulation results support those conceptual findings. Thus, some of the positive pricing-to-market results in the literature could be an artifact of the product heterogeneity embodied in unit values rather than evidence of imperfect competition. Copyright 2007, Oxford University Press.

Date: 2007
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Working Paper: Pricing-to-Market: Price Discrimination or Product Differentiation? (2004)
Working Paper: Pricing-to-Market: Price Discrimination or Product Differentiation? (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:89:y:2007:i:3:p:571-581

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