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Wholesale Price Discrimination and Parallel Imports

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Author Info
Ganslandt, Mattias () (University of Colorado)
Maskus, Keith E. () (University of Colorado)

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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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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 702.

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Length: 38 pages
Date of creation: 13 Apr 2007
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Handle: RePEc:hhs:iuiwop:0702

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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. 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)
  4. 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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  5. 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)
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