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International effects of national regulations: External reference pricing and price controls

Difei Geng and Kamal Saggi ()

Journal of International Economics, 2017, vol. 109, issue C, 68-84

Abstract: Under external reference pricing (ERP) the price that a government permits a firm to charge in its market depends upon the firm's prices in other countries. In a two-country (home and foreign) model where demand is asymmetric across countries, we show that home's unilaterally optimal ERP policy permits the home firm to engage in a threshold level of international price discrimination above which it is (just) willing to export. If the firm faces a price control abroad or bargains over price with the foreign government, an ERP policy can even yield higher home welfare than a direct price control.

Keywords: External reference pricing policies; Price controls; Patented products; Welfare (search for similar items in EconPapers)
JEL-codes: F10 F12 D42 L51 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:109:y:2017:i:c:p:68-84

DOI: 10.1016/j.jinteco.2017.08.008

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