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

Difei Geng and Kamal Saggi

Chapter 17 in Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, 2023, pp 397-413 from World Scientific Publishing Co. Pte. Ltd.

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: International Technology Transfer; Multinational Firms; Trips; Foreign Direct Investment; Oligopolistic Competition; Vertical Contracts; Intellectual Property Rights (search for similar items in EconPapers)
JEL-codes: F21 (search for similar items in EconPapers)
Date: 2023
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