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Wholesale Price Discrimination and Parallel Imports

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Author Info
Mattias Ganslandt ()
Keith Maskus ()

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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/DocCIDL/cesifo1_wp1951.pdf
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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 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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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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  1. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January. [Downloadable!] (restricted)
  2. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May. [Downloadable!] (restricted)
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  3. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Blackwell Publishing, vol. 23(9), pages 1269-1284, 09. [Downloadable!] (restricted)
  4. Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 14(1), pages 1-18, March. [Downloadable!] (restricted)
  5. Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October. [Downloadable!] (restricted)
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  6. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November. [Downloadable!] (restricted)
    Other versions:
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