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Parallel imports and repair services

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  • Ishikawa, Jota
  • Morita, Hodaka
  • Mukunoki, Hiroshi

Abstract

This study explores the welfare effects of parallel imports when the producer may refuse to provide repair services for parallel imported units, which reduces the degree of price convergence between countries. If the probability of the product’s breakdown is endogenously determined by the producer, permitting parallel imports could increase the probability, because a higher probability leads to a larger price gap. As a result, it is possible that prices increase and welfare deteriorates in both countries. This negative welfare effect is more likely to emerge as the liberalization of trade in goods proceeds. The prohibition of service discrimination recovers the positive welfare effect.

Suggested Citation

  • Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.
    • Handle: RePEc:eee:jeborg:v:172:y:2020:i:c:p:137-160
    DOI: 10.1016/j.jebo.2020.01.024
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    1. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.

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    More about this item

    Keywords

    Parallel imports; Service discrimination; Product quality; Welfare; Trade liberalization;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F10 - International Economics - - Trade - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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