CEPII, Recherche et Expertise sur l'economie mondiale
Spatial Price Discrimination in International Markets

Julien Martin

 Highlights :

 Abstract :
This paper presents a theoretical discussion and an empirical investigation of the impact of distance on the spatial pricing policy of exporting firms. The theoretical part points out the importance of transport costs formulation to determine how distance impacts fob prices. Assuming additive or iceberg transport costs might imply opposite predictions concerning this relationship. The empirical analysis is based on French export data providing us with bilateral export unit values at the firm and product level. The main empirical result is that French exporters set higher prices toward the more remote markets. This finding goes against the predictions of the main models of international trade (with or without quality) predicting either a nil or a negative impact of distance on prices at the firm level. It also questions the use of iceberg transport costs. A way to reconcile theory with the data is to introduce additive transport costs.

 Keywords : Spatial price discrimination | Export prices | Distance | Firm level data

 JEL : F10, F14, L11
CEPII Working Paper
N°2009-21, September 2009

Non Technical Summary

Full text

BibTeX (with abstract),
plain text (with abstract),
RIS (with abstract)

 Fields of expertise

Trade & Globalization