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International pricing with costly consumer arbitrage

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  • ANDERSON, Simon P.
  • GINSBURGH, Victor A.

Abstract

Consumer arbitrage affects international pricing in several ways. If all consumers face the same arbitrage costs, a monopolist’s profit increases with arbitrage costs, and world welfare declines with them (if output does not rise). If arbitrage costs differ across consumers, a monopolist may sell in a second country even if there is no local demand—it can use the second country to discriminate across consumers in the first country. Again, world welfare typically falls with arbitrage costs. When there is also local demand in the second country, world welfare may be increasing in arbitrage costs, even if output falls.
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Suggested Citation

  • ANDERSON, Simon P. & GINSBURGH, Victor A., 1999. "International pricing with costly consumer arbitrage," CORE Discussion Papers RP 1373, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1373
    Note: In : Review of International Economics, 7, 126-139, 1999
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    File URL: http://dx.doi.org/10.1111/1467-9396.00151
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
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    Cited by:

    1. Feuerstein Switgard, 2002. "Home Bias, internationale Preisdifferenzierung und Wirtschaftsintegration / Home Bias, International Price Discrimination and Economic Integration," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(1), pages 112-131, February.
    2. repec:oup:jcomle:v:1:y:2005:i:4:p:747-770. is not listed on IDEAS
    3. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2000. "E-commerce and prices - theory and evidence," SSE/EFI Working Paper Series in Economics and Finance 389, Stockholm School of Economics, revised 08 Sep 2000.
    4. ISHIKAWA Jota & MORITA Hodaka & MUKUNOKI Hiroshi, 2015. "Parallel Imports and Repair Services," Discussion papers 15060, Research Institute of Economy, Trade and Industry (RIETI).
    5. Kyle Margaret, 2011. "Strategic Responses to Parallel Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-34, January.
    6. Bruno Larue & Sébastien Pouliot & Christos Constantatos, 2009. "Exports to Smuggle and Smuggling Technologies," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 476-493, August.
    7. Matthew Burgess & Lewis Evans, 2005. "Parallel Importation And Service Quality: An Empirical Investigation Of Competition Between Dvds And Cinemas In New Zealand," Journal of Competition Law and Economics, Oxford University Press, vol. 1(4), pages 747-770.
    8. Hamilton, Jonathan H., 2012. "The effect of Canadian imports on prescription drug prices in the U.S," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1003-1008.
    9. Friberg, Richard, 2001. "Two monies, two markets?: Variability and the option to segment," Journal of International Economics, Elsevier, vol. 55(2), pages 317-327, December.
    10. Teodora Cosac, 2004. "Vertical Restraints and Parallel Imports with Differentiated Products," Industrial Organization 0401006, EconWPA.
    11. Joan Costa-Font, 2016. "Is medicines parallel trade ‘regulatory arbitrage’?," International Journal of Health Economics and Management, Springer, vol. 16(4), pages 321-336, December.
    12. Braouezec, Yann, 2012. "Customer-class pricing, parallel trade and the optimal number of market segments," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 605-614.
    13. Noriaki Matsushima & Toshihiro Matsumura, 2010. "Profit-Enhancing Parallel Imports," Open Economies Review, Springer, vol. 21(3), pages 433-447, July.
    14. Séverine HALLER & Marie-Hélène JEANNERET, 2003. "Importations parallèles sur le marché automobile européen : une analyse en termes de différentiation verticale," Discussion Papers (REL - Recherches Economiques de Louvain) 2003024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    15. repec:eee:indorg:v:55:y:2017:i:c:p:137-165 is not listed on IDEAS
    16. Séverine Haller & Marie-Hélène Jeanneret, 2003. "Importations parallèles sur le marché automobile européen : une analyse en termes de différenciation verticale," Recherches économiques de Louvain, De Boeck Université, vol. 69(2), pages 181-204.
    17. Hsiu-Li Chen, 2009. "Gray Marketing: Does It Hurt the Manufacturers?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 23-35, March.
    18. Guillaume Gaulier & Séverine Haller, 2000. "The Convergence of Automobile Prices in the European Union: an Empirical Analysis for the Period 1993-1999," Working Papers 2000-14, CEPII research center.
    19. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2001. "Pricing Strategies in E-Commerce: Bricks vs. Clicks," Working Paper Series 559, Research Institute of Industrial Economics.

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