American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Understanding International Prices: Customers as Capital
American Economic Review
vol. 102,
no. 1, February 2012
(pp. 364–95)
Abstract
The article develops a new theory of pricing to market driven by dynamic frictions of building market shares. Our key innovation is a capital theoretic model of marketing in which relations with customers are valuable. We discipline the introduced friction using data on differences between short-run and long-run price elasticity of international trade flows. We show that the model accounts for several pricing "puzzles" of international macroeconomics. (JEL E13, F14, F31, F41, F44, M31)Citation
Drozd, Lukasz A., and Jaromir B. Nosal. 2012. "Understanding International Prices: Customers as Capital." American Economic Review, 102 (1): 364–95. DOI: 10.1257/aer.102.1.364Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- F14 Country and Industry Studies of Trade
- F31 Foreign Exchange
- F41 Open Economy Macroeconomics
- F44 International Business Cycles
- M31 Marketing