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| Lavoie, Nathalie; Liu, Qihong. |
| We employ a vertical differentiation model to examine the potential bias in pricing-to-market (PTM) results when using unit values aggregating differentiated products. Our results show that: i) false evidence of PTM ("pseudo PTM") is always found when using unit values, whether the law of one price holds or not; and ii) the extent to which results are biased due to pseudo PTM increases with the level of product differentiation. Correspondingly, our simulation results suggest that: i) it is possible to get a statistically significant estimate of the exchange rate coefficient, even when there is no real PTM; ii) the probability of a false PTM finding increases with product differentiation. Pseudo PTM is the result of a change in the mix of qualities imported... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Demand and Price Analysis; Marketing. |
| Ano: 2004 |
URL: http://purl.umn.edu/14524 |
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| Lavoie, Nathalie; Liu, Qihong. |
| Pricing to market (PTM) has been examined extensively in the recent trade literature using Knetter's (1989) model. The technique is typically applied using export unit values that aggregate differentiated products. We examine the potential bias in PTM results when using export unit values using a vertical differentiation model. We find that: i) false evidence of PTM ("pseudo PTM") is always found due to aggregation when calculating export unit values, whether the law of one price (LOP) holds or not; ii)when markets are segmented, the fraction of pseudo PTM increases with the level of product differentiation. Correspondingly, our simulation results suggest that: i) it is possible to get a statistically significant estimate of the exchange rate coefficient,... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Marketing. |
| Ano: 2004 |
URL: http://purl.umn.edu/20287 |
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