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Preprints, Working Papers, ... Year : 2022

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

Vanessa Alvariez
  • Function : Author
  • PersonId : 1170016
Michele Fioretti
Ayumu Ken Kikkawa
  • Function : Author
  • PersonId : 1170017
Monica Morlacco
  • Function : Author
  • PersonId : 1170018

Abstract

We develop a quantitative theory of prices in firm-to-firm trade with bilateral negotiations and two-sided market power. Markups reflect oligopoly and oligopsony forces, with relative bargaining power as weight. Cost pass-through elasticities into import prices can be incomplete or complete, depending on the exporter's and importer's bargaining power and market shares. In U.S. import data, we find that U.S. importers have substantial market power and disproportionate leverage in price negotiations. The estimated model produces accurate predictions of the impact of Trump tariffs on pair-level prices. At the aggregate level, ignoring two-sided market power could exaggerate tariff pass-through by about 60%.
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Dates and versions

hal-03795736 , version 1 (04-10-2022)
hal-03795736 , version 2 (26-03-2024)

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Vanessa Alvariez, Michele Fioretti, Ayumu Ken Kikkawa, Monica Morlacco. Two-Sided Market Power in Firm-to-Firm Trade. 2022. ⟨hal-03795736v2⟩
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