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

Alviarez Vanessa, Michele Fioretti, Ken Kikkawa and Morlacco Monica

Papers from arXiv.org

Abstract: We develop and estimate a model of two-sided market power to study tariff pass-through in firm-to-firm trade. A tariff moves the negotiated price through two channels: the bilateral markup, set by bargaining, and the supplier's marginal cost, which falls alongside quantities under decreasing returns. The same decreasing returns give concentrated buyers rents to bargain over, so prices fall with the buyer's share of its supplier's output. Using U.S. customs data, we estimate substantial importer bargaining power and steep export supply. Within continuing relationships, suppliers absorb about 30 percent of the 2018 tariffs, primarily through lower marginal costs as demand contracts.

Date: 2025-07, Revised 2026-10
New Economics Papers: this item is included in nep-com
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https://arxiv.org/pdf/2507.12848 Latest version (application/pdf)

Related works:
Working Paper: Two-Sided Market Power in Firm-to-Firm Trade (2026)
Working Paper: Two-sided market power in firm-to-firm trade (2025)
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)
Working Paper: Two-Sided Market Power in Firm-to-Firm Trade (2022)
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