2011-09 “Exports-at-Risk”

"There is a well-established literature examining possible impacts on competition in oligopolistic markets from multi-market contact (MMC) among diversified firms. While much of this work is related to Edwards (1955) it was not formalized and broadly tested until the late 1970s. The theoretical work of Bernheim and Whinston (1990) has led to more recent research in this area. However, only recently have trade theorists begun to apply a similar approach to examining the effects of trade, where MMC among exporters may limit (or reverse completely) the anticipated pro-competitive role of imports. This paper presents a first effort to test the empirical importance of a measure of this MMC, called “exports-at-risk,” on import-unit values. I examine 10 highly-traded 4-digit HS products within the broad category of “fats and oils” – focusing on the 20 leading import markets and the 5 major exporters to each market."