Learning, Prices, and Firm Dynamics

Paulo Bastos, Daniel Dias and Olga Timoshenko

No 86, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: We document new facts about the evolution of rm performance and prices in international markets, and propose a theory of rm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we nd that: (1)firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) the volatility of output and input prices tends to decline with export experience; and (4) input prices and quantities tend to increase with revenue growth within rms. We develop a model of endogenous input and output quality choices in a learning environment that is able to account for these patterns. Counterfactual simulations reveal that minimum quality standards on traded goods reduce welfare by lowering entry in export markets and reallocating resources from old and large towards young and small rms.

Keywords: Learning about demand; prices; product quality; firm dynamics; quality standards (search for similar items in EconPapers)
JEL-codes: F12 F14 L11 O14 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2017-11, Revised 2017-11
New Economics Papers: this item is included in nep-ind and nep-int
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http://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_86.pdf First version, 2017 (application/pdf)

Related works:
Journal Article: Learning, prices and firm dynamics (2018)
Journal Article: Learning, prices and firm dynamics (2018)
Working Paper: Learning, Prices, and Firm Dynamics (2017)
Working Paper: Learning, Prices, and Firm Dynamics (2017)
Working Paper: Learning, Prices, and Firm Dynamics (2016)
Working Paper: Learning, Prices, and firm dynamics (2016)
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