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Equilibrium parallel import policies and international market structure

  • Roy, Santanu
  • Saggi, Kamal

In a North-South vertically differentiated duopoly, the analysis in this paper derives equilibrium government policies towards parallel imports. By incorporating strategic interaction at the policy-setting stage and the product market, the model sheds new light on (i) the effects of parallel import policies on pricing behavior of firms and (ii) the interdependence of national parallel import policies. If demand asymmetry across countries is sufficiently large, the North forbids parallel imports 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 parallel imports and uniform pricing -- its most preferred market outcome -- obtains.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5802.

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Date of creation: 01 Sep 2011
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Handle: RePEc:wbk:wbrwps:5802
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  17. 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.
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