Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets
We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports (PI). The manufacturing firm needs to set these two prices to balance three competing interests: restricting competition in the PI-recipient market, avoiding resource wastes due to actual trade, and reducing the double-markup problem in the PI-source nation. These trade-offs imply the counterintuitive result that both wholesale and retail prices could diverge as a result of declining trading costs, even as the volume of PI increases. Thus, in some circumstances it may be misleading to think of PI as an unambiguous force for price integration.
|Date of creation:||15 Apr 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Horst Raff & Nicolas Schmitt, 2000.
"Endogenous Vertical Restraints in International Trade,"
CESifo Working Paper Series
284, CESifo Group Munich.
- Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October.
- Horst Raff & Nicolas Schmitt, 2000. "Endogenous Vertical Restraints in International Trade," Discussion Papers dp00-04, Department of Economics, Simon Fraser University, revised Feb 2000.
- 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.
- Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
- Raff, Horst & Schmitt, Nicolas, 2006.
"Exclusive dealing and common agency in international markets,"
Journal of International Economics,
Elsevier, vol. 68(2), pages 485-503, March.
- Horst Raff & Nicolas Schmitt, 2004. "Exclusive Dealing and Common Agency in International Markets," CESifo Working Paper Series 1168, CESifo Group Munich.
- Raff, Horst & Schmitt, Nicolas, 2004. "Exclusive Dealing and Common Agency in International Markets," Economics Working Papers 2004,09, Christian-Albrechts-University of Kiel, Department of Economics.
- Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
- Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, 03.
- Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
- Yongmin Chen & Keith Maskus, 2005. "Vertical Pricing and Parallel Imports," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(1), pages 1-18.
- Friberg, Richard & Martensen, Kaj, 2001. "Endogenous Market Segmentation and the Law of One Price," SSE/EFI Working Paper Series in Economics and Finance 471, Stockholm School of Economics.
When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0639. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson)
If references are entirely missing, you can add them using this form.