Pricing to Market When Quality Matters

47 Pages Posted: 10 Mar 2010

See all articles by Roberto Basile

Roberto Basile

University of L'Aquila - Faculty of Economics

Sergio de Nardis

Istituto di Studi e Analisi Economica (ISAE)

Alessandro Girardi

National Institute of Statistics (ISTAT)

Date Written: December 22, 2009

Abstract

We build a model of price differentiation with firm heterogeneity, which allows for imperfect competition and market segmentation in the presence of flexible exchange rates as well as horizontal and vertical differentiation and different tastes of consumers in destination markets. We empirically assess the main predictions of our theoretical framework by using firm-level data surveyed by ISAE. We document that export-domestic price margins are significantly affected by price and quality competitiveness even controlling for foreign demand conditions, size, export intensity, destination markets and unobservables. Finally, we provide evidence of a strong heterogeneity across firms in their reaction to price and quality competitiveness.

Keywords: Pricing to market, qualitative choice models, firm heterogeneity

JEL Classification: D21, F10, C23, C25

Suggested Citation

Basile, Roberto and de Nardis, Sergio and Girardi, Alessandro, Pricing to Market When Quality Matters (December 22, 2009). Available at SSRN: https://ssrn.com/abstract=1557565 or http://dx.doi.org/10.2139/ssrn.1557565

Roberto Basile

University of L'Aquila - Faculty of Economics ( email )

Roio Poggio, 67040
Italy

Sergio De Nardis (Contact Author)

Istituto di Studi e Analisi Economica (ISAE) ( email )

Piazza dell' Indipendenza 4
I-00185
Italy

Alessandro Girardi

National Institute of Statistics (ISTAT) ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

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