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Equilibrium Parallel Import Policies and International Market Structure

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Author Info

  • Kamal Saggi

    ()
    (Department of Economics, Vanderbilt University)

  • Santanu Roy

    ()
    (Department of Economics, Southern Methodist University)

Abstract

In a North-South vertically differentiated duopoly, we derive equilibrium government policies towards parallel imports (PIs). By incorporating strategic interaction at the policy-setting stage and the product market, the model sheds new light on (i) the effects of PI policies on pricing behavior of firms and (ii) the interdependence of national PI policies. If demand asymmetry across countries is sufficiently large, the North forbids PIs to ensure its firm sells in the South thereby generating international price discrimination -- the South's most preferred market outcome -- as the equilibrium. When demand structures are relatively similar across countries, the North permits PIs and uniform pricing -- its most preferred market outcome -- obtains.

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File URL: http://www.accessecon.com/pubs/VUECON/vu11-w13.pdf
File Function: First version, September 2011
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 1113.

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Date of creation: Sep 2011
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Handle: RePEc:van:wpaper:1113

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Parallel Imports; Oligopoly; Quality; Product Differentiation; Market Structure; Welfare; Trade Policy;

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References

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Cited by:
  1. Kamal Saggi, 2013. "Market Power in the Global Economy: The Exhaustion and Protection of Intellectual Property," Economic Journal, Royal Economic Society, vol. 123(567), pages 131-161, 03.
  2. Roy, Santanu & Saggi, Kamal, 2011. "Equilibrium parallel import policies and international market structure," Policy Research Working Paper Series 5802, The World Bank.
  3. Santanu Roy & Kamal Saggi, 2012. "Strategic competition and optimal parallel import policy," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1369-1396, November.

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