Parallel trade, product quality, and welfare
AbstractWe study the welfare effects of parallel trade (PT) considering investment in quality. We thus revisit the case for allowing PT in research-intensive industries. We find that quality may be higher with than without PT, depending on how consumersÕ preferences for quality differ across countries. Conditional on quality, consumer surplus may rise in the source country, or fall in the destination country of PT. We find that PT reduces ex post welfare, and improving quality is a necessary (and sometimes sufficient) condition for PT to increase welfare ex ante.
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Bibliographic InfoPaper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIAG Technical Reports with number 2013-14.
Length: 13 pages
Date of creation: 2013
Date of revision:
Parallel trade; Price discrimination; R&D investment; Intellectual property rights;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-COM-2013-11-22 (Industrial Competition)
- NEP-GTH-2013-11-22 (Game Theory)
- NEP-IND-2013-11-22 (Industrial Organization)
- NEP-INO-2013-11-22 (Innovation)
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