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- W2183640437 abstract "We develop a model of quality pricing and international trade. Our model is based on Musa and Rosen (1978). Firms sell goods of heterogeneous quality to consumers that dier in their willingness to pay for quality. In equilibrium, the market power of a given …rm depends on the prices and qualities of its closest competitors more than on prices of further away …rms. Mark-ups therefore depend mostly on market conditions in the vicinity of a …rm's quality. We test the static and dynamic predictions of this simple model in the European car market. In this speci…c market, low quality cars are more likely to be exported than high quality cars. Competition abroad is stronger for low quality cars, leading to low export prices in the low quality segment. We also …nd that exchange rate pass-through is larger for low quality cars, as a large fraction of the competitors of low quality exporters are other low quality exporters that face the same exchange rate shocks." @default.
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- W2183640437 date "2007-01-01" @default.
- W2183640437 modified "2023-09-24" @default.
- W2183640437 title "How do the Prices of Different Goods Respond to Exchange Rate Shocks? A Model of Quality Pricing-to-Market" @default.
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