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Abstract

The objective of this article is to measure the market power of U.S. grain exporters in the Asian countries. This study revisits the issue of the market power with the Goldberg and Knetter (1999) model, addressing an issue about using nominal exchange rate as a cost shifter. This study proposes an adjusted nominal exchange rate deflated by inflation rates of exporting countries and exchange rate risk as another possible risk shifter. The results of the preliminary estimation show that using the adjusted exchange rate provides better results. The results also show that U.S. wheat exporters have market power in Philippine, Korea, Malaysia, and Singapore, while no market power in Indonesia and Japan. Australia plays a significant role in constraining the market power of U.S. wheat exporters in the Asian market, suggesting that a proper economic model in the Asian country might be U.S.-Australia duopoly model.

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