Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 702: Wholesale Price Discrimination and Parallel Imports

Mattias Ganslandt () and Keith E. Maskus ()
Additional contact information
Mattias Ganslandt: University of Colorado, Postal: Department of Economics, Campus Box 256, 80309-0256, Colorado, USA
Keith E. Maskus: University of Colorado, Postal: Department of Economics,Campus Box 256, 80309-0256, Colorado, USA

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

JEL-codes: F15; K21; L14

38 pages, April 13, 2007

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