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Retailers as Agents and the Absence of Parallel Trade

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  • Stähler, Frank
  • Maskus, Keith

Abstract

Legalized parallel trade implies that an original manufacturer cannot control a retailer in a foreign country once the latter has ordered its sales quantity and has compensated the former. This paper endogenizes the role of the retailer as an agent who has private information on the perceived quality of the good in the foreign country. Paradoxically, if parallel trade is permitted there will be no such trade in the only equilibrium, in which the manufacturer offers a smaller volume to the retailer than in the case where it is not permitted. This outcome makes both the original producer and foreign consumers worse off.

Suggested Citation

  • Stähler, Frank & Maskus, Keith, 2013. "Retailers as Agents and the Absence of Parallel Trade," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79737, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79737
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    References listed on IDEAS

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    1. Tommaso M. Valletti & Stefan Szymanski, 2006. "Parallel Trade, International Exhaustion And Intellectual Property Rights: A Welfare Analysis," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 499-526, December.
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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