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Equilibrium Parallel Import Policies and International Market Structure

Author

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  • Kamal Saggi

    () (Department of Economics, Vanderbilt University)

  • Santanu Roy

    () (Department of Economics, Southern Methodist University)

Abstract

In a North-South vertically differentiated duopoly, we derive equilibrium government policies towards parallel imports (PIs). By incorporating strategic interaction at the policy-setting stage and the product market, the model sheds new light on (i) the effects of PI policies on pricing behavior of firms and (ii) the interdependence of national PI policies. If demand asymmetry across countries is sufficiently large, the North forbids PIs to ensure its firm sells in the South thereby generating international price discrimination -- the South's most preferred market outcome -- as the equilibrium. When demand structures are relatively similar across countries, the North permits PIs and uniform pricing -- its most preferred market outcome -- obtains.

Suggested Citation

  • Kamal Saggi & Santanu Roy, 2011. "Equilibrium Parallel Import Policies and International Market Structure," Vanderbilt University Department of Economics Working Papers 1113, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:1113
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bennato, Anna Rita & Valletti, Tommaso, 2014. "Pharmaceutical innovation and parallel trade," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 83-92.
    2. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    3. repec:eee:inecon:v:109:y:2017:i:c:p:68-84 is not listed on IDEAS
    4. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters,in: Handbook on the Economics of Copyright, chapter 16, pages 287-310 Edward Elgar Publishing.
    5. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    6. Roy, Santanu & Saggi, Kamal, 2012. "Equilibrium parallel import policies and international market structure," Journal of International Economics, Elsevier, vol. 87(2), pages 262-276.
    7. Eric W. Bond & Kamal Saggi, 2017. "Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 31-62, February.
    8. Birg, Laura, 2015. "Parallel trade and reimbursement regulation," Center for European, Governance and Economic Development Research Discussion Papers 253, University of Goettingen, Department of Economics.
    9. Geng, Difei & Saggi, Kamal, 2017. "International effects of national regulations: External reference pricing and price controls," Journal of International Economics, Elsevier, vol. 109(C), pages 68-84.

    More about this item

    Keywords

    Parallel Imports; Oligopoly; Quality; Product Differentiation; Market Structure; Welfare; Trade Policy;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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