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Export Credit as a Mechanism for Price Discrimination

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  • James Vercammen

Abstract

Export credit is shown to be a mechanism that facilitates price discrimination. The scenario considered is one of competitive exporters' selling to a cash importer with a relatively inelastic demand schedule and a credit importer with a relatively elastic demand schedule. The spot markets of the two importing countries is assumed to be perfectly and costlessly arbitraged. In the absence of export credit, price discrimination is not possible, even with government intervention. If export credit is used but the government does not intervene, price discrimination is also not possible. Export credit used in conjunction with targeted export price subsidies or loan guarantees generate rents from price discrimination, despite the perfect arbitrage constraint.

Suggested Citation

  • James Vercammen, 1998. "Export Credit as a Mechanism for Price Discrimination," Canadian Journal of Economics, Canadian Economics Association, vol. 31(2), pages 279-294, May.
    • Handle: RePEc:cje:issued:v:31:y:1998:i:2:p:279-294
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    1. repec:ags:aare02:125165 is not listed on IDEAS
    2. Seyoum, Emayenesh & Goddard, Ellen & MacLaren, Donald & Griffith, Garry, 2002. "Modelling World Dairy Trade: The Potential Impact of Officially Supported Export Credits on the Australian Dairy Industry," 2002 Conference (46th), February 13-15, 2002, Canberra, Australia 183422, Australian Agricultural and Resource Economics Society.

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