Pricing to Firm: an Analysis of Firm‐ and Product‐level Import Prices

We use  Hungarian  Customs  data  on  product-level  imports  of  manufacturing  firms  to  document  that  the import  price  of  a  particular  product  varies  substantially  across  buying  firms. We  relate  the  level  of  import prices  to  firm  characteristics  such  as  size, foreign  ownership, and  market  power. We  develop  a  theory  of “pricing  to  firm” (PTF), where  markups  depend  on  the  technology  and  competitive  environment  of  the buyer. The predictions of the model are confirmed by the data: import prices are higher for firms with greater market  power, and  for  more  essential  intermediate  inputs  (with  a  high  share  in  material  costs). We  take account  of  the  endogeneity  of  the  buyer’s  market  power  with  respect  to  higher  import  prices  and  unobserved cost heterogeneity within product categories. The magnitude of PTF is big: the standard deviation of price predicted by PTF is 21.5%.