We thank three anonymous referees, Pol Antràs, Gábor K
rösi, Marc Melitz, Deborah Swenson, Silvana Tenreyro, János Vincze, and seminar participants at Harvard, the Institute of Economics, and the “Empirical Investigations in International Economics” conference at the University of Ljubljana for comments, and Ágnes Nagy for help with the data. Any remaining errors are ours. The views expressed in this paper are ours and do not necessarily reflect the views of the Federal Reserve Bank of New York or the Federal Reserve System.
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Pricing to Firm: an Analysis of Firm- and Product-level Import Prices†
Article first published online: 21 JUN 2007
DOI: 10.1111/j.1467-9396.2007.00668.x
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How to Cite
Halpern, L. and Koren, M. (2007), Pricing to Firm: an Analysis of Firm- and Product-level Import Prices. Review of International Economics, 15: 574–591. doi: 10.1111/j.1467-9396.2007.00668.x
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Publication History
- Issue published online: 21 JUN 2007
- Article first published online: 21 JUN 2007
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Abstract
We use Hungarian Customs data on product-level imports of manufacturing firms to document that the import price of a particular product varies substantially across buying firms. We relate the level of import prices to firm characteristics such as size, foreign ownership, and market power. We develop a theory of “pricing to firm” (PTF), where markups depend on the technology and competitive environment of the buyer. The predictions of the model are confirmed by the data: import prices are higher for firms with greater market power, and for more essential intermediate inputs (with a high share in material costs). We take account of the endogeneity of the buyer’s market power with respect to higher import prices and unobserved cost heterogeneity within product categories. The magnitude of PTF is big: the standard deviation of price predicted by PTF is 21.5%.