Two-Sided Market Power in Firm-to-Firm Trade
We develop a quantitative theory of prices in firm-to-firm trade with 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 nearly 60%.
Date:
21 February 2024, 14:00 (Wednesday, 6th week, Hilary 2024)
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Skills Lab or https://zoom.us/j/92994614950
Speaker:
Monica Morlacco (University of Southern California)
Organising department:
Department of Economics
Part of:
Seminar in Macroeconomics
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Edward Clark
