TY - JOUR
T1 - “IT’S NOT YOU, IT’S ME”
T2 - PRICES, QUALITY, AND SWITCHING IN U.S.-CHINA TRADE RELATIONSHIPS
AU - Monarch, Ryan
N1 - Publisher Copyright:
© 2020 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
PY - 2022/9
Y1 - 2022/9
N2 - Costs from switching suppliers can affect prices by discouraging buyer movements from high-to low-cost sellers. This paper uses confidential data on U.S. importers and their Chinese exporters to investigate these costs. I find barriers to supplier adjustments: nearly half of importers keep their partner over time. Importers switch less if their supplier offers higher quality or provides lower prices. I propose and structurally estimate a dynamic discrete choice model to compute switching costs. Cost estimates are large, heterogeneous across products, and matter for trade prices: halving switching costs reduces the U.S.-China Import Price Index by 7.6%.
AB - Costs from switching suppliers can affect prices by discouraging buyer movements from high-to low-cost sellers. This paper uses confidential data on U.S. importers and their Chinese exporters to investigate these costs. I find barriers to supplier adjustments: nearly half of importers keep their partner over time. Importers switch less if their supplier offers higher quality or provides lower prices. I propose and structurally estimate a dynamic discrete choice model to compute switching costs. Cost estimates are large, heterogeneous across products, and matter for trade prices: halving switching costs reduces the U.S.-China Import Price Index by 7.6%.
UR - http://www.scopus.com/inward/record.url?scp=85138921586&partnerID=8YFLogxK
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U2 - 10.1162/rest_a_01015
DO - 10.1162/rest_a_01015
M3 - Article
AN - SCOPUS:85138921586
SN - 0034-6535
VL - 104
SP - 909
EP - 928
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 5
ER -