Tariff policy and exhaustion of intellectual property rights in the presence of parallel imports

Jung Hur and Yohanes Riyanto

Oxford Economic Papers, 2006, vol. 58, issue 3, 549-568

Abstract: This paper examines an interplay between tariff policy and parallel-import policy. From a welfare point of view, a host government would prefer allowing parallel imports to prohibiting them. However, if a tariff is not at the government's disposal, there will be no parallel imports in equilibrium because a foreign manufacturer would prefer adopting a uniform pricing policy to a discriminatory pricing policy, which will prevent parallel imports from occurring. If a tariff is at the government's disposal, it can be set optimally to induce the foreign manufacturer to impose a price discrimination policy. Such a policy will facilitate entry by a parallel importer provided that parallel imports are feasible. Copyright 2006, Oxford University Press.

Date: 2006
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