Distance to destination and export price variation within agri-food firms

Abstract

Abstract This paper assesses how bilateral distance affects within-firm-product variation in free-on-board (FOB) export prices across destinations. I estimate linear models that regress firm-product-destination-time FOB unit values on distance, firm-product-time fixed effects and destination country controls. If distance doubles, the average Swiss agri-food firm increases its FOB export price by 2.3 per cent. However, the positive distance elasticity of export prices reflects product quality differences and/or variable markups. I disentangle both mechanisms and show that, for a given product quality, exporting firms charge higher markups in distant markets. Nevertheless, this form of price discrimination is less pronounced for higher-quality products.