International effects of national regulations: external reference pricing and price controls
Difei Geng and
Kamal Saggi ()
No 17-00010, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics
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: F1 D4 (search for similar items in EconPapers)
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Journal Article: International effects of national regulations: External reference pricing and price controls (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-17-00010
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