Vanessa Alviarez from the Inter-American Development Bank will present "Two-Sided Market Power in Firm-to-Firm Trade"

Abstract: We develop a quantitative model of firm-to-firm trade with bilateral negotiations and two-sided market power. Markups reflect both oligopoly and oligopsony forces, weighted by the relative bargaining power of buyers and sellers. Pass-through of costs into import prices can be incomplete or complete, depending on each party’s bargaining position and market share. Using U.S. import data, we find that U.S. importers hold substantial market power and exert disproportionate influence in price negotiations. The model accurately predicts the impact of Trump-era tariffs on pair-level prices. At the aggregate level, ignoring two-sided market power leads to a significant overestimation of tariff pass-through.