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International effects of national regulations: external reference pricing and price controls

Author

Listed:
  • Difei Geng

    (University of Arkansas-Fayetteville)

  • Kamal Saggi

    (Vanderbilt University)

Abstract

Under external reference pricing (ERP) the price that a government permits a firm to charge in its market depends upon the firm's prices in other countries. In a two-country (home and foreign) model where demand is asymmetric across countries, we show that home's unilaterally optimal ERP policy permits the home firm to engage in a threshold level of international price discrimination above which it is (just) willing to export. If the firm faces a price control abroad or bargains over price with the foreign government, an ERP policy can even yield higher home welfare than a direct price control.

Suggested Citation

  • Difei Geng & Kamal Saggi, 2017. "International effects of national regulations: external reference pricing and price controls," Vanderbilt University Department of Economics Working Papers 17-00010, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:vuecon-sub-17-00010
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    References listed on IDEAS

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    Cited by:

    1. Foad Iravani & Hamed Mamani & Emisa Nategh, 2020. "External Reference Pricing and Parallel Imports of Pharmaceuticals: A Policy Comparison," Production and Operations Management, Production and Operations Management Society, vol. 29(12), pages 2716-2735, December.
    2. Xinyu Hou & Puyang Sun, 2023. "The impact of dismantling state monopoly on market integration: Evidence from the edible salt reform in China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(3), pages 589-609, July.
    3. Gamba, S.; & Pertile, P.; & Righetti, G.;, 2022. "Spillovers of Pharmaceutical Price Regulations: evidence from the AMNOG Reform in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 22/20, HEDG, c/o Department of Economics, University of York.
    4. Geng, Difei & Saggi, Kamal, 2020. "Optimal price regulations in international pharmaceutical markets with generic competition," Journal of Health Economics, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    External reference pricing policies; price controls; patented products; welfare.;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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