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How continuing exporters set the price? Theory and empirical evidence from China

Yong Tan, Faqin Lin and Cui Hu

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we build a dynamic game model of quantity competition to explain the price difference between continuing exporters and exits. Continuing exports are forward looking and they may intentionally set a lower price in the export market at current stage to crowd out the competitors to maximize the overall expected profit in their total life period. Using a large sample of matched panel data of Chinese firms from firm-level production data and product-level trade data, we find that after controlling the most important determinants of export price as well as the firm-year-specific effects, continuing exporters charge a price 42.4%-54.0% lower than the price level charged by future exits in China.

Keywords: Export prices; Dynamic game; Quantity competition (search for similar items in EconPapers)
JEL-codes: C73 F10 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-bec, nep-cna, nep-int and nep-tra
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https://mpra.ub.uni-muenchen.de/65534/1/MPRA_paper_65534.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/72293/1/MPRA_paper_65534.pdf revised version (application/pdf)

Related works:
Journal Article: How continuing exporters set the price? Theory and empirical evidence from China (2016) Downloads
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