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Trade Policy and Parallel Imports

In: Dimensions of Trade Policy

Author

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  • Daniel Knox
  • Martin Richardson

Abstract

We consider the simultaneous choice of parallel importing regime and tariff policy in a setting of international price discrimination by a monopolist. We show that an importer’s optimal tariff decreases when parallel imports (PIs) are permitted. This may lead to the monopolist benefiting from PIs. Allowing PIs is always attractive for a country whether or not it sets an optimal tariff. In a political economy modification, we show that the prohibition of PIs is more likely to emerge (where it would not otherwise) the more the government cares about lobby contributions and the greater are profits from price discrimination.

Suggested Citation

  • Daniel Knox & Martin Richardson, 2017. "Trade Policy and Parallel Imports," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 15, pages 301-325, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813207615_0015
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    References listed on IDEAS

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    1. 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.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. Gallini, Nancy T. & Hollis, Aidan, 1999. "A contractual approach to the gray market," International Review of Law and Economics, Elsevier, vol. 19(1), pages 1-21, March.
    4. Martin Richardson, 2017. "An Elementary Proposition Concerning Parallel Imports," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 14, pages 285-299, World Scientific Publishing Co. Pte. Ltd..
    5. Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, September.
    6. Hideo Konishi & Kamal Saggi & Shlomo Weber, 2023. "Endogenous trade policy under foreign direct investment," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 23, pages 523-542, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Raff, Horst & Schmitt, Nicolas, 2007. "Why parallel trade may raise producers' profits," Journal of International Economics, Elsevier, vol. 71(2), pages 434-447, April.
    2. Panos Kanavos & Sotiris Vandoros, 2010. "Competition in prescription drug markets: is parallel trade the answer?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 325-338.
    3. Shih-shen Chen & Chu-Chuan Hsu & Chin-shu Huang, 2013. "Lobbying, corruption and “optimal” tariff," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(4), pages 375-386, December.
    4. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.

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    More about this item

    Keywords

    Trade Policy; Preferential Trading Agreements; Content Protection; Parallel Imports;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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