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Equilibrium Parallel Import Policies and International Market Structure

Author

Listed:
  • Kamal Saggi

    (Department of Economics, Vanderbilt University)

  • Santanu Roy

    (Department of Economics, Southern Methodist University)

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

Suggested Citation

  • Kamal Saggi & Santanu Roy, 2011. "Equilibrium Parallel Import Policies and International Market Structure," Vanderbilt University Department of Economics Working Papers 1113, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:1113
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Eric W. Bond & Kamal Saggi, 2023. "Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 20, pages 449-480, World Scientific Publishing Co. Pte. Ltd..
    2. Reisinger, Markus & Saurí, Lluís & Zenger, Hans, 2019. "Parallel imports, price controls, and innovation," Journal of Health Economics, Elsevier, vol. 66(C), pages 163-179.
    3. Birg, Laura, 2019. "Price Caps versus Reimbursement Limits: Pharmaceutical Regulation under Market Integration through Parallel Trade," University of Göttingen Working Papers in Economics 253, University of Goettingen, Department of Economics, revised 2019.
    4. Bennato, Anna Rita & Valletti, Tommaso, 2014. "Pharmaceutical innovation and parallel trade," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 83-92.
    5. Santanu Roy & Kamal Saggi, 2023. "Equilibrium parallel import policies and international market structure," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 15, pages 349-363, World Scientific Publishing Co. Pte. Ltd..
    6. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.
    7. Geng, Difei & Saggi, Kamal, 2020. "Optimal price regulations in international pharmaceutical markets with generic competition," Journal of Health Economics, Elsevier, vol. 71(C).
    8. Eric W. Bond & Kamal Saggi, 2023. "Compulsory Licensing And Patent Protection: A North-South Perspective," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 21, pages 481-503, World Scientific Publishing Co. Pte. Ltd..
    9. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    10. Santanu Roy & Kamal Saggi, 2012. "Strategic competition and optimal parallel import policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1369-1396, November.
    11. Eric W. Bond & Kamal Saggi, 2023. "Patent protection in developing countries and global welfare: WTO obligations versus flexibilities," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 22, pages 505-520, World Scientific Publishing Co. Pte. Ltd..
    12. Laura Birg, 2023. "Pharmaceutical regulation under market integration through parallel trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1322-1346, November.
    13. Reto Foellmi & Christian Hepenstrick & Zweimüller Josef, 2018. "International Arbitrage and the Extensive Margin of Trade between Rich and Poor Countries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(1), pages 475-510.
    14. Geng, Difei & Saggi, Kamal, 2017. "International effects of national regulations: External reference pricing and price controls," Journal of International Economics, Elsevier, vol. 109(C), pages 68-84.
    15. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters, in: Richard Watt (ed.), Handbook on the Economics of Copyright, chapter 16, pages 287-310, Edward Elgar Publishing.
    16. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    17. Dao-Zhi Zeng & Biyue Zhang, 2020. "Parallel imports in large developing countries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 65(2), pages 509-525, October.

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    More about this item

    Keywords

    Parallel Imports; Oligopoly; Quality; Product Differentiation; Market Structure; Welfare; Trade Policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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