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Wholesale Price Discrimination and Parallel Imports

  • Ganslandt, Mattias

    ()

    (University of Colorado)

  • Maskus, Keith E.

    ()

    (University of Colorado)

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets integrated at the distributor level by parallel imports (PI). In this context we show that if competition policy requires uniform wholesale prices across locations it would push retail prices toward convergence as transportation costs fall. However, these retail prices could be higher than those induced without restrictions on prices charged to distributors. Thus, the competition policy may not be optimal for consumer welfare.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 702.

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Length: 38 pages
Date of creation: 13 Apr 2007
Date of revision:
Handle: RePEc:hhs:iuiwop:0702
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  1. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
  2. Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series 639, Research Institute of Industrial Economics.
  3. Horst Raff & Nicolas Schmitt, 2000. "Endogenous Vertical Restraints in International Trade," CESifo Working Paper Series 284, CESifo Group Munich.
  4. Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, 03.
  5. 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.
  6. 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.
  7. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
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