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Institut für Weltwirtschaft (IfW), Kiel >
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http://hdl.handle.net/10419/24884
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| Title: | | Exchange-rate misalignments in duopoly : the case of Airbus and Boeing  |
| Authors: | | Bénassy-Quéré, Agnès Fontagné, Lionel Raff, Horst |
| Issue Date: | | 2009 |
| Series/Report no.: | | Kiel working paper 1488 |
| Abstract: | | We examine the effect of exchange-rate misalignments on competition in the market for large commercial aircraft. This market is a duopoly where players compete in dollar-denominated prices while one of them, Airbus, incurs costs mostly in euros. We construct and calibrate a simulation model to investigate how companies adjust their prices to deal with the effects of a temporary misalignment, and how this affects profit margins and volumes. We also explore the effects on the long-run dynamics of competition. We conclude that due to the duopolistic nature of the aircraft market, Airbus will pass only a small part of the exchange-rate fluctuations on to customers through higher prices. Moreover, due to features specific to the aircraft industry, such as customer switching costs and learning-by-doing, even a temporary departure of the exchange rate from its long-run equilibrium level may have permanent effects on the industry. |
| Subjects: | | Exchange rates pass-through oligopoly |
| JEL: | | F31 L13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Kieler Arbeitspapiere, IfW
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