Price and quality dispersion in an offshoring market: evidence from semiconductor production services
Brian K. Kovak and
No 2013-06, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)
We study cross-country differences in price and quality in the market for semiconductor wafer manufacturing services. Using a proprietary transaction-level data set, we document i) substantial constant-quality price differences across suppliers, and ii) shifts toward lower priced suppliers. Chinese producers on average charged 17% less than leading Taiwanese producers for otherwise identical products and increased their market share by 14.7 percentage points. The extent of cross-country price dispersion is also diminishing over a product's life. A model with costs of switching suppliers is consistent with these pricing dynamics and can sustain realistic quality-adjusted price dispersion.
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Working Paper: Price and Quality Dispersion in an Offshoring Market: Evidence from Semiconductor Production Services (2013)
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