Strategic competition and optimal parallel import policy

Santanu Roy and Kamal Saggi ()

Canadian Journal of Economics, 2012, vol. 45, issue 4, 1369-1396

Abstract: In a two-country Hotelling type duopoly model of price competition, we show that parallel import (PI) policy can act as an instrument of strategic trade policy. The home firm's profit is higher when it cannot price discriminate internationally if and only if the foreign market is sufficiently bigger than the domestic one. The key mechanism in the model is that the home firm's incentive to keep its domestic price close to the optimal monopoly price affects its behavior during price competition abroad. We also analyze the welfare implications of PI policies and show that our key insights extend to quantity competition.

JEL-codes: F10 F13 F15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Journal Article: Strategic competition and optimal parallel import policy (2012)
Working Paper: Strategic Competition and Optimal Parallel Import Policy (2011)
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