nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒05‒04
one paper chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Wholesale Price Discrimination and Parallel Imports By Ganslandt, Mattias; Maskus, Keith E.

  1. By: Ganslandt, Mattias (University of Colorado); Maskus, Keith E. (University of Colorado)
    Abstract: We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets integrated at the distributor level by parallel imports (PI). In this context we show that if competition policy requires uniform wholesale prices across locations it would push retail prices toward convergence as transportation costs fall. However, these retail prices could be higher than those induced without restrictions on prices charged to distributors. Thus, the competition policy may not be optimal for consumer welfare.
    Keywords: Vertical Restraints; Parallel Imports; Market Integration; Price Discrimination; Competition Policy
    JEL: F15 K21 L14
    Date: 2007–04–13

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