When it is unclear whether a currency depreciation is permanent,exporters may choose not to raise their prices,especially if they fear losing market share in markets with existing production and distribution facilities.This is known as the:
A) market share effect.
B) beachhead effect.
C) pass-through effect.
D) parity effect.

Question

Quizplus · Accepted Answer

This is known as the beachhead effect, where exporters choose not to raise prices in fear of losing market share in markets where they already have a foothold. This strategy aims to maintain market share by absorbing the cost of the currency depreciation rather than passing it onto customers. This can provide a long-term benefit if the currency depreciation proves to be temporary.

When It Is Unclear Whether a Currency Depreciation Is Permanent,exporters