Domestic competition and export performance of manufacturing firms in Côte d’Ivoire

Abstract

Because of transportation costs, African manufacturing firms benefit from some market power on their domestic market, where they can charge a higher price than the export price, net of transportation cost. We present a simple theoretical model of an exporting firm that discriminates between the export and the domestic markets, where firms engage in Cournot competition. It is then shown that the impact of increased competition on export performance by the firms is ambiguous, and may be negative for a non trivial range of parameter values. Using survey data on Ivoirian firms, our empirical analysis gives some support to this prediction, showing that the probability of a firm exporting decreases with increased competition.