| Vertical Price Control And Parallel Imports (1999) | |||||||||||||||
Abstract | |||||||||||||||
| : We overview the international policy debate concerning parallel imports, which are goods traded without the authorization of an original trademark or copyright owner. Parallel imports are likely to have multiple causes, including vertical price control, which we model. A manufacturer selling its product through an independent agent needs to set the wholesale price suciently low to induce a desired retail price in a certain country. This creates an opportunity for the agent to sell the product protably, outside authorized distribution channels, in another country. The combined social surplus in two countries is shown to rst decrease and then increase in the private cost of parallel trade. Restricting parallel imports always benets the manufacturer, but it may either raise or reduce global surplus. These ndings suggest certain policy implications. Both informal empirical evidence and econometric work indicate that our vertical-control explanation of parallel imports is important in pra... | |||||||||||||||
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