International Pricing with Costly Consumer Arbitrage

Simon Anderson and Victor Ginsburgh
Authors registered in the RePEc Author Service: Arevalo Flores Victor, Jr.

Review of International Economics, 1999, vol. 7, issue 1, 126-39

Abstract: Consumer arbitrage affects international pricing in several ways. If all consumers face the same arbitrage costs, a monopolists profit increases with arbitrage costs, and world welfare declines with them (if output does not rise). If arbitrage costs differ across consumers, a monopolist may sell in a second country even if there is no local demand--it can use the second country to discriminate across consumers in the first country. Again, world welfare typically falls with arbitrage costs. When there is also local demand in the second country, world welfare may be increasing in arbitrage costs, even if output falls. Copyright 1999 by Blackwell Publishing Ltd.

Date: 1999
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