Exports, Foreign Market Structure, and Profitability in Japanese and U.S Manufacturing

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Abstract
This paper examines the influence of price decisions by foreign firms on export price decisions by domestic firms. The theoretical analysis develops a general model which hypothesis a positive relation between export price and foreign price assuming international product differentiation. This model further suggests that export price depends on foreign structural traits as they determine foreign price. The empirical analysis, based on a cross-section of 69 four-digit manufacturing industries matched between the United States and Japan, provided support for the hypothesis that foreign market structure and foreign pricing affect export pricing and thus the observed price-cost margin.

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