Abstract
Abstract Costs from switching suppliers can affect prices by discouraging buyer movements from high- to low-cost sellers. This paper uses confidential data on U.S. importers and their Chinese exporters to investigate these costs. I find barriers to supplier adjustments: nearly half of importers keep their partner over time. Importers switch less if their supplier offers higher quality or provides lower prices. I propose and structurally estimate a dynamic discrete choice model to compute switching costs. Cost estimates are large, heterogeneous across products, and matter for trade prices: halving switching costs reduces the U.S.-China Import Price Index by 7.6%.
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