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

Tan, Yong and Lin, Faqin and Hu, Cui (2015): How continuing exporters set the price? Theory and empirical evidence from China. Published in: International Review of Economics and Finance , Vol. 44, (April 2016): pp. 91-102.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Export prices, Dynamic game, Quantity competition
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games; F - International Economics > F1 - Trade > F10 - General

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