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Wholesale Price Discrimination and Parallel Imports

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  • Mattias Ganslandt
  • Keith E. Maskus

Abstract

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets integrated at the distributor level by parallel imports (PI). In this context we show that if competition policy requires uniform wholesale prices across locations it would push retail prices toward convergence as transportation costs fall. However, these retail prices could be higher than those induced without restrictions on prices charged to distributors. Thus, the competition policy may not be optimal for consumer welfare.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-03/cesifo1_wp1951.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1951.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1951

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Related research

Keywords: vertical restraints; parallel imports; market integration; price discrimination; competition policy;

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References

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  1. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
  2. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
  3. Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series 639, Research Institute of Industrial Economics.
  4. Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October.
  5. Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
  6. Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 1-18.
  7. Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, 03.
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Cited by:
  1. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," CESifo Working Paper Series 1996, CESifo Group Munich.

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