Does parallel trade freedom harm consumers in small markets?
Countries can freely decide whether to permit or ban parallel trade. Article 6 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) – being the only provision in the various international agreements on intellectual property rights that deals with the treatment of parallel trade – preserves the territorial privilege for regulating parallel trade. In a parallel trade model with two heterogeneous countries in terms of market size, we address the question as to whether parallel trade freedom is beneficial or detrimental from a consumer’s perspective. In particular, the model suggests that parallel trade freedom is detrimental to consumers in the country with the smaller market as less of a certain product is sold at a higher price. However, parallel trade freedom is likely to be beneficial to consumers in the country with the larger market. We also find that the smaller country, in terms of market size, will remain unserved under parallel trade freedom if the second country is sufficiently attractive in terms of market size.
|Date of creation:||15 Apr 2009|
|Date of revision:|
|Publication status:||Published in Croatian Economic Survey 11.1(2009): pp. 11-41|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Frank Müller-Langer, . "An Analysis of the Welfare Effects of Parallel Trade Freedom," German Working Papers in Law and Economics 2008-1-1225, Berkeley Electronic Press.
- Szymanski, Stefan & Valletti, Tommaso, 2005.
"Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis,"
CEPR Discussion Papers
5022, C.E.P.R. Discussion Papers.
- Tommaso Valletti & Stefan Szymanski, 2006. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEIS Research Paper 75, Tor Vergata University, CEIS.
- Schmalensee, Richard., 1980.
"Output and welfare implications of monopolistic third-degree price discrimination,"
1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March.
- Malueg, D.A. & Schwartz, M., 1993.
"Parallel Imports, Demand Dispersion and International Price Discrimination,"
93-6, U.S. Department of Justice - Antitrust Division.
- 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.
- Abbott, Frederick M, 1998. "First Report (Final) to the Committee on International Trade Law of the International Law Association on the Subject of Parallel Importation," Journal of International Economic Law, Oxford University Press, vol. 1(4), pages 607-36, December.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Ganslandt, Mattias & Maskus, Keith E., 2004.
"Parallel Import and the Pricing of Pharmaceutical Products: Evidence from the European Union,"
Working Paper Series
622, Research Institute of Industrial Economics.
- Ganslandt, Mattias & Maskus, Keith E., 2004. "Parallel imports and the pricing of pharmaceutical products: evidence from the European Union," Journal of Health Economics, Elsevier, vol. 23(5), pages 1035-1057, September.
- 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, 09.
- Maskus, Keith E. & Yongmin Chen, 2000. "Vertical price control and parallel imports - theory and evidence," Policy Research Working Paper Series 2461, The World Bank.
- Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
- J. S. Chard & C. J. Mellor, 1989. "Intellectual Property Rights and Parallel Imports," The World Economy, Wiley Blackwell, vol. 12(1), pages 69-84, 03.
- Ganslandt, Mattias & Maskus, Keith E. & Wong, Eina V., 2001.
"Developing and Distributing Essential Medicines to Poor Countries: The DEFEND Proposal,"
Working Paper Series
552, Research Institute of Industrial Economics.
- Mattias Ganslandt & Keith E. Maskus & Eina V. Wong, 2001. "Developing and Distributing Essential Medicines to Poor Countries: The DEFEND Proposal," The World Economy, Wiley Blackwell, vol. 24(6), pages 779-795, 06.
- Hausman, J.A. & Mackie-Mason, J.K., 1988.
"Price Discrimination And Patent Policy,"
88-13, Michigan - Center for Research on Economic & Social Theory.
- Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, 03.
- Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Care Finance and Economics, Springer, vol. 5(1), pages 5-21, January.
- Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March.
- Stefan Szymanski & Tommaso Valletti, 2005. "Parallel trade, price discrimination, investment and price caps," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 705-749, October.
- 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.
- Panos Kanavos & Joan Costa-Font, 2005. "Pharmaceutical parallel trade in Europe: stakeholder and competition effects," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 751-798, October.
- Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September.
- Carsten Fink & Keith E. Maskus, 2005. "Intellectual Property and Development : Lessons from Recent Economic Research," World Bank Publications, The World Bank, number 7443.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40194. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.