Price discrimination and markups in export markets

Imperfect competition in international markets is one of the key explanations for why prices of 'similar' goods might differ among destination countries. This paper develops an empirical model to examine the presence of price discrimination stemming from imperfect competition in the international market for a country's exports. The model is used to examine the export behavior of Taiwanese exporters of footwear. The generalized supply relation allows identification of deviations from competitive pricing in each export market. In addition, the model provides insights into the extent of exchange rate pass-through. Finally, the model is modified in order to estimate the effect of the voluntary export restraint imposed in the U.S. on footwear imports from Taiwan.