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Exchange Rates and Product Variety

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  • Witness Simbanegavi

Abstract

We study the role of exchange rate variability in the firm’s choice of whether to o¤er one or two varieties. We show that variability induces the firm to vertically segment markets (offer two varieties). This happens because variability in the exchange rate a¤ects income dispersion and hence the firm’s incentives to extract consumer surplus. To […]

Suggested Citation

  • Witness Simbanegavi, 2007. "Exchange Rates and Product Variety," Working Papers 060, Economic Research Southern Africa.
    • Handle: RePEc:rza:wpaper:060
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    References listed on IDEAS

    as
    1. Friberg, Richard, 2001. "Two monies, two markets?: Variability and the option to segment," Journal of International Economics, Elsevier, vol. 55(2), pages 317-327, December.
    2. Gordon M. Bodnar & Bernard Dumas & Richard C. Marston, 2002. "Pass‐through and Exposure," Journal of Finance, American Finance Association, vol. 57(1), pages 199-231, February.
    3. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 635-654.
    4. GABSZEWICZ, Jean J., 1983. "Blue and red cars, or blue cars only? A note on product variety," LIDAM Reprints CORE 524, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Richard Friberg, 1999. "Exchange Rates and the Firm," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-333-98237-2, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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