Victor Gimenez-Perales 

(Kiel Institute for the World Economy)

will give a presentation on

Demand uncertainty in foreign markets. Learning from competitors and sequential market entry

Abstract

Firms face uncertainty about their residual demand when deciding whether to enter new export markets. We develop a model where firms with heterogeneous quality face uncertainty about consumers' appeal for quality in unexplored foreign markets, translating into uncertainty on their residual demand and export potential. Firms can progressively learn about their export potential in these markets by observing and interacting with their competitors in the domestic market and third foreign markets. We analyse the relevance of the different learning mechanisms for firms' entry decisions into new export markets and characterise the firms' entry dynamics into new foreign markets and the respective sectoral equilibrium path. Using customs data from Colombia, Chile and Paraguay, we estimate the model parameters and provide a quantitative analysis.

With Mario Larch and Leandro Navarro (University of Bayreuth). 

The seminars are held online from 15:30h to 16:30h.