Vertical Price Control and Parallel Imports: Theory and Evidence
AbstractThe paper analyzes parallel imports, or goods traded without the authorization of a trademark owner. Parallel imports have multiple causes, including vertical price control, which the authors model. A manufacturer selling its product through an independent agent sets the wholesale price sufficiently low to induce a desired retail price abroad. This permits the agent to sell the product profitably in the originating market. Combined social surplus decreases and then increases in the cost of parallel trade. Restricting parallel imports benefits the manufacturer, but could raise or reduce global surplus. The econometric analysis indicates that the vertical-control explanation of parallel imports is important. Copyright Blackwell Publishing Ltd 2004.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 12 (2004)
Issue (Month): 4 (09)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
Other versions of this item:
- Maskus, Keith E. & Yongmin Chen, 2000. "Vertical price control and parallel imports - theory and evidence," Policy Research Working Paper Series 2461, The World Bank.
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