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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

    as
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    More about this item

    Keywords

    External reference pricing policies; price controls; patented products; welfare.;

    JEL classification:

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

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