Pricing to Market in Response to Unobservable and Observable Shocks

Abstract

This paper generalizes an empirical framework used to study export price adjustment to multiple destination markets. The framework can identify demand parameters without making restrictive assumptions about the functional form of cost or demand and without reliance on cost data. The method relies on imposing a symmetric response of export prices to marginal cost and exchange rate changes. The specification relying on this identifying restriction is tested using German and U. S. 7-digit industry export unit values against alternative identifying restrictions restrictions used in earlier work. [F14]