Richard Friberg: Dept. of Economics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden
Abstract: This paper studies a simple duopoly model of price competition under exchange rate uncertainty with pre-set prices and differentiated goods. Competitors come from different countries and compete in a foreign market. We study the effect of the price setting currency chosen on expected prices, profits and exchange rate exposure as well as equilibrium choice of price setting currency. For a wide range of parameter values price setting in the importer's currency is the dominant strategy. Implications of limited exchange rate pass-through for exchange rate exposure are dicussed. The exchange rate pass-through elasticity is shown to be increasing in own-price effects. Parallels are drawn to the literature on strategic trade policy.
26 pages, First version: September 17, 1997. Revised: January 30, 1998.
Full text files
hastef0196.tab.ps.zip PostScript file tables and figure
hastef0196.tab.ps PostScript file tables and figure
hastef0196.tab.pdf.zip tables and figure
hastef0196.tab.pdf tables and figure
hastef0196.pdf.zip Full text
hastef0196.pdf Full text
hastef0196.ps.zip PostScript file Full text
hastef0196.ps PostScript file Full text
Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2018-03-27 10:24:42.