ABSTRACT
China, the world's largest wheat producer and consumer, has also emerged as the world's largest wheat importer during the 1990s. Such pricing behaviour indicates inelastic supply of Canadian and US wheat exports to China. This chapter extends the pricing-to-market (PTM) framework first proposed by P. Krugman and implemented by M. M. Knetter. It extends the PTM framework to ask whether China, as a large buyer, can engage in price discrimination among exporting origins in the international wheat market. As the PTM model was developed on the basis of pricing decisions by exporting firms across destinations, however, it might not be readily suitable for the examination of pricing behaviour by importers. The basic data set to be analysed consists of annual observations from 1981 to 1995 on the prices of wheat imports from the five suppliers, Argentina, Australia, Canada, EU and the United States, as well as relevant bilateral exchange rates.
