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Pricing-to-Markets and Firm Size: Survey Evidence From Swiss Exporters
1 Introduction
Do firm-specific factors explain why some companies price-discriminate across export markets and others do not? Two decades of micro-based theoretical research in international macroeconomics have shown that our thinking on crucial issues like the desirability of fixed versus flexible exchange rates can be strongly influenced by specific assumptions about the price-setting behavior of firms.1 Traditional empirical research, however, has primarily emphasized country- and sector-specific factors to explain international price discrimination (Goldberg and Knetter 1997). This paper, in contrast, reports on the importance of firm size.There are a number of potential reasons why large exporters are more likely to set different prices in different markets than small exporters. At the most basic level, basic microeconomics teaches us that firms need a sufficient degree of market power to be able to act as price-setters (and not price-takers). Without market power, there will be no price discrimination, be it at a national or international level. The degree of market power, of course, depends not only on a firm's absolute size; what matters most of all, is its size relative to the size of the market (and possibly the size of competitor firms).A second link between firm size and interna...Voir le contenu complet de ce document
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