Two monies, two markets? Variability and the option to segment

This paper examines the decision to create barriers to arbitrage for a firm selling on two national markets. Sunk costs of market segmentation imply that the option to segment markets is more valuable the greater the variability of purchasing power between markets. One result is that a monetary union may lead to market integration when a fixed exchange rate did not. Extensions examine hysterisis, transport costs and general equilibrium modeling.

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Year of publication:	2000-01-04
Authors:	Friberg, Richard
Institutions:	Economics Institute for Research (SIR), Handelshögskolan i Stockholm
Subject:	Exchange rate pass-through \| law of one price \| EMU \| price discrimination \| real options

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Extent:	application/pdf application/postscript
Series:	SSE/EFI Working Paper Series in Economics and Finance.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series SSE/EFI Working Paper Series in Economics and Finance Number 349 33 pages
Classification:	F13 - Commercial Policy; Protection; Promotion; Trade Negotiations ; F15 - Economic Integration ; F41 - Open Economy Macroeconomics ; L40 - Antitrust Policy. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005649205