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| Author: | Friberg, R. |
| Title: | Two monies, two markets? Variability and the option to segment |
| Journal: | Journal of International Economics
2001 : DEC, VOL. 55:2, p. 317-327 |
| Index terms: | EUROPEAN MONETARY SYSTEM EXCHANGE RATES OPTIONS PRICE DISCRIMINATION |
| Language: | eng |
| Abstract: | This paper examines the decision to create barriers to arbitrage for a firm selling in two national markets. Real exchange rate changes affect the incentives to create such barriers since they influence the optimal prices. Sunk costs of market segmentation imply that the option to segment markets is more valuable the greater the variability of the real exchange rate. If a monetary union reduces future real exchange rate variability it could thus stimulate market integration. |
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