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Parallel Imports in a Model of Vertical Distribution: Theory, Evidence and Policy
Author(s) -
Maskus Keith E.,
Chen Yongmin
Publication year - 2002
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.00167
Subject(s) - economics , trademark , distribution (mathematics) , incentive , distributor , empirical evidence , work (physics) , grey market , microeconomics , econometric analysis , international economics , econometrics , market economy , computer science , mechanical engineering , mathematical analysis , philosophy , mathematics , epistemology , engineering , operating system
Parallel imports are goods traded without the authorization of an original trademark or copyright owner. In this paper, a model where parallel imports arise because of incentive problems in vertical distributions is discussed. A distributor receiving goods from a manufacturer at a low wholesale price can profitably sell the goods in another country, outside the authorized distribution channel. The manufacturer can limit such parallel imports by raising wholesale prices, but this reduces vertical pricing efficiency. Parallel imports can thus occur in equilibrium. The model is supported by empirical evidence from existing studies and new econometric work. Policy implications of the analysis are discussed.