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Optimal Monopolist Export Pricing with Dynamic Demand and Learning Curve Effects

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  • Matthias Göcke

    (University of Giessen)

  • Svetlana Fedoseeva

    (University of Giessen)

Abstract

This paper addresses incomplete exchange rate pass-through (ERPT) and pricing-to-market (PTM) by proposing an optimal control model of dynamic monopolistic pricing on a foreign market, which accounts for dynamic demand effects (such as diffusion or saturation) and learning curve effects. It is shown how the optimal dynamic export pricing results in partial or full ERPT in the long-term equilibrium. Moreover, transitional price dynamics are illustrated, which may explain dumping, i.e., temporary prices below unit costs, and (asymmetric) short-run overshooting dynamics of the optimal export price level as a reaction to exchange rate changes.

Suggested Citation

  • Matthias Göcke & Svetlana Fedoseeva, 2016. "Optimal Monopolist Export Pricing with Dynamic Demand and Learning Curve Effects," Open Economies Review, Springer, vol. 27(3), pages 447-469, July.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:3:d:10.1007_s11079-015-9380-x
    DOI: 10.1007/s11079-015-9380-x
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    Cited by:

    1. Zou, Zongsen & Zhang, Yu & Wang, Meng & Wang, Xiuling, 2022. "Do export quality and destination income matter for exchange rate pass-through? Evidence from China," Economic Modelling, Elsevier, vol. 117(C).

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    More about this item

    Keywords

    Dynamic pricing; Demand diffusion; Exchange rate pass-through; Learning-by-doing; Pricing-to-market; Dumping; Overshooting;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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