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A model of parallel imports of pharmaceuticals with endogenous price controls

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  • Katherine Sauer

    (University of Southern Indiana)

Abstract

A model is developed to explore the behavior of an original manufacturer with a patent in response to a policy that permits parallel import competition from a country with price controls on the patented good. The model suggests that a manufacturer will limit its supply to the PI-exporting market. The home price is lower only under certain conditions. The relative size of the home market to the potential volume of PIs is a key determinant of the manufacturer's decision to accommodate competition or deter it. Whether the firm accommodates or deters competition, profits fall.

Suggested Citation

  • Katherine Sauer, 2008. "A model of parallel imports of pharmaceuticals with endogenous price controls," Economics Bulletin, AccessEcon, vol. 6(36), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-08f10024
    as

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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • I1 - Health, Education, and Welfare - - Health

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