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How continuing exporters set the price? Theory and empirical evidence from China

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  • Tan, Yong
  • Lin, Faqin
  • Hu, Cui

Abstract

In this paper, we build a dynamic game model of quantity competition to explain the price difference between continuing exporters and exits. Continuing exports are forward looking and set a lower price at current stage to crowd out the competitors to maximize their overall expected profit. Using a large sample of matched panel data of Chinese firms, we find that after controlling the most important determinants of export price and the firm-year-specific effects, continuing exporters charge a price 39.2%–41.6% lower than the price level charged by future exits in China.

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  • Tan, Yong & Lin, Faqin & Hu, Cui, 2016. "How continuing exporters set the price? Theory and empirical evidence from China," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 91-102.
    • Handle: RePEc:eee:reveco:v:44:y:2016:i:c:p:91-102
    DOI: 10.1016/j.iref.2016.03.009
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    2. Qin Lu & Zongyi Zhang, 2022. "Do Financial Support Policies Catalyse the Development of New Consumption Field?—Evidence from China’s New Consumer Enterprises," Sustainability, MDPI, vol. 14(20), pages 1-23, October.
    3. Bai, Rui & Lin, Boqiang, 2024. "Green finance and green innovation: Theoretical analysis based on game theory and empirical evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 760-774.

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    More about this item

    Keywords

    Export prices; Dynamic game; Quantity competition;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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