Exchange-Rate Misalignments in Duopoly: the Case of Airbus and Boeing

Agnès Benassy-Quere, Lionel Fontagné and Horst Raff

Working Papers from CEPII research center

Abstract: We examine the effect of exchange-rate misalignments on competition in the market for large commercial aircraft. This market is a duopoly where players compete in dollar-denominated prices while one of them, Airbus, incurs costs mostly in euros. We construct and calibrate a simulation model to investigate how companies adjust their prices to deal with the effects of a temporary misalignment, and how this affects profit margins and volumes. We also explore the effects on the long-run dynamics of competition. We conclude that, due to the duopolistic nature of the aircraft market, Airbus will pass only a small part of the exchange-rate fluctuations on to customers through higher prices. Moreover, due to features specific to the aircraft industry, such as customer switching costs and learning-by-doing, even a temporary departure of the exchange rate from its long-run equilibrium level may have permanent effects on the industry.

Keywords: Exchange-rate pass-through; duopoly; aircraft industry (search for similar items in EconPapers)
JEL-codes: D43 F31 L11 L62 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-com, nep-mic and nep-opm
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.cepii.fr/PDF_PUB/wp/2009/wp2009-10.pdf (application/pdf)

Related works:
Journal Article: Exchange‐rate Misalignments in Duopoly: The Case of Airbus and Boeing (2011)
Working Paper: Exchange-rate Misalignments in Duopoly: The Case of Airbus and Boeing (2011)
Working Paper: Exchange-rate Misalignments in Duopoly: The Case of Airbus and Boeing (2011)
Working Paper: Exchange-rate Misalignments in Duopoly: The Case of Airbus and Boeing (2011)
Working Paper: Exchange-rate misalignments in duopoly: the case of Airbus and Boeing (2009)
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:cii:cepidt:2009-10

Access Statistics for this paper

More papers in Working Papers from CEPII research center Contact information at EDIRC.
Bibliographic data for series maintained by ().