Review of Economic Studies Vol. 81 No. 2 2014
Pricing-to-Market: Evidence From Plant-Level Prices
Abstract
We use micro data on Irish producer prices to provide clean evidence on pricing-to-market across a broad range of manufacturing sectors. We have monthly observations on prices charged by the same plant for the same product to buyers in Ireland and the UK, two markets segmented by variable exchange rates. Assuming that relative marginal cost is constant across markets within a plant and a product, this allows us to observe the behaviour of the markup in the UK market relative to the home market. To identify pricing-to-market that goes beyond what is mechanically due to price stickiness, we condition on episodes where prices change. When prices are invoiced in local currency, conditional on prices changing, the ratio of the markup in the foreign market to the markup in the home market increases one-for-one with depreciations of home against foreign currency and decreases one-for-one with appreciations of home against foreign currency, a very particular form of pricing-to-market.
- DOI
- 10.1093/restud/rdt045
- Volume
- 81
- Issue
- 2
- Pages
- 761-786
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref