PARALLEL IMPORTS, MARKET SIZE AND INVESTMENT INCENTIVE

Alfons Palangkaraya and Jongsay Yong ()
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Jongsay Yong: Centre for Microeconometrics, Melbourne Institute of Applied Economic and Social Research, Australia;

The Singapore Economic Review (SER), 2009, vol. 54, issue 02, 167-181

Abstract: This paper proposes a vertical control model that features two-part tariff pricing, leader-fringe-follower competition, and investment to characterize the conditions under which parallel imports will (or will not) occur when such activities are legally permitted. In addition, we analyze the effects of parallel imports on the incentive of an authorized distributor to invest in market development. We find that parallel imports cannot arise if the target and the source market either differ too greatly or are too similar in size. Two results are worth emphasizing. First, parallel imports can arise even if the IP owner has the ability to deter parallel imports. Second, the presence of parallel imports and even the threat posed by parallel imports can reduce the domestic distributor's market development investment.

Keywords: Parallel imports; vertical control; Intellectual Property (IP) law (search for similar items in EconPapers)
Date: 2009
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Working Paper: Parallel Imports, Market Size and Investment Incentive (2006)
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DOI: 10.1142/S0217590809003252

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