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Retailers as Agents and the Absence of Parallel Trade

  • Stähler, Frank
  • Maskus, Keith

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.

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File URL: http://econstor.eu/bitstream/10419/79737/1/VfS_2013_pid_335.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79737.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79737
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
  2. Ganslandt, Mattias & Maskus, Keith E., 2001. "Parallel Imports of Pharmaceutical Products in the European Union," Working Paper Series 546, Research Institute of Industrial Economics.
  3. Gene M. Grossman & Edwin C.-L. Lai, 2006. "Parallel Imports and Price Controls," NBER Working Papers 12423, National Bureau of Economic Research, Inc.
  4. Szymanski, Stefan & Valletti, Tommaso, 2005. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEPR Discussion Papers 5022, C.E.P.R. Discussion Papers.
  5. Changying Li, 2006. "Competition, Parallel Imports And Cost-Reducing Innovation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 377-397, 07.
  6. Maskus, Keith E. & Yongmin Chen, 2000. "Vertical price control and parallel imports - theory and evidence," Policy Research Working Paper Series 2461, The World Bank.
  7. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
  8. Maskus, Keith E. & Ganslandt, Mattias, 2007. "Intellectual Property Rights, Parallel Imports and Strategic Behavior," Working Paper Series 704, Research Institute of Industrial Economics.
  9. Gene M. Grossman & Edwin L.-C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402.
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