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International effects of national regulations: External reference pricing and price controls

In: Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy

Author

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  • Difei Geng
  • Kamal Saggi

Abstract

Under external reference pricing (ERP) the price that a government permits a firm to charge in its market depends upon the firm’s prices in other countries. In a two-country (home and foreign) model where demand is asymmetric across countries, we show that home’s unilaterally optimal ERP policy permits the home firm to engage in a threshold level of international price discrimination above which it is (just) willing to export. If the firm faces a price control abroad or bargains over price with the foreign government, an ERP policy can even yield higher home welfare than a direct price control.

Suggested Citation

  • Difei Geng & Kamal Saggi, 2023. "International effects of national regulations: External reference pricing and price controls," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 17, pages 397-413, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813233027_0017
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    More about this item

    Keywords

    International Technology Transfer; Multinational Firms; Trips; Foreign Direct Investment; Oligopolistic Competition; Vertical Contracts; Intellectual Property Rights;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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