Working Paper Series
Wholesale Price Discrimination and Parallel Imports
() and Keith E. Maskus
Abstract: We develop a model of vertical pricing in which an
original manufacturer sets wholesale prices in two markets integrated at
the distributor level by parallel imports (PI). In this context we show
that if competition policy requires uniform wholesale prices across
locations it would push retail prices toward convergence as transportation
costs fall. However, these retail prices could be higher than those induced
without restrictions on prices charged to distributors. Thus, the
competition policy may not be optimal for consumer welfare.
Keywords: Vertical Restraints; Parallel Imports; Market Integration; Price Discrimination; Competition Policy; (follow links to similar papers)
JEL-Codes: F15; K21; L14; (follow links to similar papers)
38 pages, April 13, 2007
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