Parallel trade, product quality, and welfare

Giorgio Matteucci and Pierfrancesco Reverberi

Economics Letters, 2014, vol. 122, issue 2, 258-262

Abstract: We study the welfare effects of parallel trade (PT) considering investment in quality. We thus revisit the case for PT in research-intensive industries. We find that PT may raise quality, depending on how preferences for quality differ across countries. Conditional on quality, consumer surplus may rise (fall) in the PT-source (PT-recipient) country. While PT reduces ex post welfare, improving quality is a necessary condition for PT to increase welfare ex ante.

Keywords: Parallel trade; Price discrimination; R&D investment; Intellectual property rights (search for similar items in EconPapers)
JEL-codes: F13 L12 O34 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:122:y:2014:i:2:p:258-262

DOI: 10.1016/j.econlet.2013.12.004

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