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Equilibrium parallel import policies and international market structure

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  • Roy, Santanu
  • Saggi, Kamal

Abstract

In a North-South vertically differentiated duopoly, the analysis in this paper derives equilibrium government policies towards parallel imports. By incorporating strategic interaction at the policy-setting stage and the product market, the model sheds new light on (i) the effects of parallel import policies on pricing behavior of firms and (ii) the interdependence of national parallel import policies. If demand asymmetry across countries is sufficiently large, the North forbids parallel imports 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 parallel imports and uniform pricing -- its most preferred market outcome -- obtains.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5802.

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Date of creation: 01 Sep 2011
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Handle: RePEc:wbk:wbrwps:5802

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Keywords: Markets and Market Access; Access to Markets; Economic Theory&Research; Microfinance; Emerging Markets;

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References

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  1. Szymanski, Stefan & Valletti, Tommaso, 2005. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEPR Discussion Papers 5022, C.E.P.R. Discussion Papers.
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  16. Roy, Santanu & Saggi, Kamal, 2011. "Equilibrium parallel import policies and international market structure," Policy Research Working Paper Series 5802, The World Bank.
  17. Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, 03.
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Citations

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Cited by:
  1. Kamal Saggi, 2011. "Market power in the global economy: the exhaustion and protection of intellectual property," Vanderbilt University Department of Economics Working Papers 1114, Vanderbilt University Department of Economics.
  2. Kamal Saggi & Santanu Roy, 2011. "Equilibrium Parallel Import Policies and International Market Structure," Vanderbilt University Department of Economics Working Papers 1113, Vanderbilt University Department of Economics.
  3. Kamal Saggi, 2013. "The regional exhaustion of intellectual property," Vanderbilt University Department of Economics Working Papers 13-00011, Vanderbilt University Department of Economics.
  4. Kamal Saggi & Santanu Roy, 2011. "Strategic Competition and Optimal Parallel Import Policy," Vanderbilt University Department of Economics Working Papers 1117, Vanderbilt University Department of Economics.

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