Vertical Restraints and Parallel Imports with Differentiated Products
A monopoly selling in two countries can use exclusive or competitive retailers to distribute its product. A low wholesale price in one country might induce a retailer to resell the good for profit in the other country, generating thereby parallel imports which compete with the authorized sales. Assuming that consumers consider the authorized good to be of higher quality than the parallel import, we show that it is often in the interest of the manufacturer to encourage the availability of parallel imported goods. We study equilibrium price strategies for the manufacturer as reflected in the chosen vertical contracts. We show that when the arbitrage cost is relatively low and the authorized good and the parallel import are poor substitutes, manufacturer's profits can be higher when parallel imports are allowed.
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.:
- Maskus, Keith E. & Yongmin Chen, 2000.
"Vertical price control and parallel imports - theory and evidence,"
Policy Research Working Paper Series
2461, The World Bank.
- 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.
- Raymond J. Deneckere & R. Preston McAfee, 1996.
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 5(2), pages 149-174, 06.
- 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.
- Nancy T. Gallini & Aidan Hollis, 1996.
"A Contractual Approach to the Gray Market,"
gallini-96-01, University of Toronto, Department of Economics.
- 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.
- Malueg, D.A. & Schwartz, M., 1993. "Parallel Imports, Demand Dispersion and International Price Discrimination," Papers 93-6, U.S. Department of Justice - Antitrust Division.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
- Reza Ahmadi & B. Rachel Yang, 2000. "Parallel Imports: Challenges from Unauthorized Distribution Channels," Marketing Science, INFORMS, vol. 19(3), pages 279-294, March.
- Anderson, Simon P & Ginsburgh, Victor A, 1999.
"International Pricing with Costly Consumer Arbitrage,"
Review of International Economics,
Wiley Blackwell, vol. 7(1), pages 126-39, February.
- ANDERSON, Simon P. & GINSBURGH, Victor A., . "International pricing with costly consumer arbitrage," CORE Discussion Papers RP 1373, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Wiley Blackwell, vol. 23(9), pages 1269-1284, 09.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0401006. 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: (EconWPA)
If references are entirely missing, you can add them using this form.