| Sumario: | The writer examines the choice of price setting currency for an exporter confronted with the choice of setting price in his own, in the importer's, or in a third currency under exchange rate uncertainty. He argues that sufficient conditions on demand and cost functions for exchange rate pass-through to be less than unity under certainty are also sufficient conditions for price setting in the importer's currency to generate the highest anticipated profit under exchange rate uncertainty. In addition, he contends that under the same conditions on demand and cost functions, setting price in the importer's currency maximizes anticipated utility when risk aversion and forward currency markets are introduced.
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