EXCHANGE-RATE PASS-THROUGH FOR STRATEGIC PRICING AND ADVERTISING - ANEMPIRICAL-ANALYSIS OF THE US PHOTOGRAPHIC FILM INDUSTRY

This paper builds a model in the ''new empirical industrial organizati on'' framework [Bresnahan, T., 1989. Industries and Market Power. In: Schmalensee, R., Willig, R. (Eds.), Handbook of Industrial Organizatio n. North Holland, Amsterdam.] to estimate exchange rate pass-through i n price and advertising. Price-cost margins, market structure and firm conduct are estimated endogenously, allowing for precise estimation o f the degree of, and reasons for, incomplete pass-through. I demonstra te that price and advertising pass-through are functions of demand, co st and market conduct in the short run. In the long run, the market co nduct and cost technologies are, in turn, determined by the exchange r ate movements. (C) 1997 Elsevier Science B.V.