Parallel Imports, Market Size And Investment Incentive
AbstractThis paper proposes a vertical control model that features two-part tariff pricing, leader-fringe-follower competition, and investment to characterize the conditions under which parallel imports will (or will not) occur when such activities are legally permitted. In addition, we analyze the effects of parallel imports on the incentive of an authorized distributor to invest in market development. We find that parallel imports cannot arise if the target and the source market either differ too greatly or are too similar in size. Two results are worth emphasizing. First, parallel imports can arise even if the IP owner has the ability to deter parallel imports. Second, the presence of parallel imports and even the threat posed by parallel imports can reduce the domestic distributor's market development investment.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal The Singapore Economic Review.
Volume (Year): 54 (2009)
Issue (Month): 02 ()
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Other versions of this item:
- Alfons Palangkaraya & Jongsay Yong, 2006. "Parallel Imports, Market Size and Investment Incentive," Melbourne Institute Working Paper Series wp2006n25, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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