Premium
Concurrence stratégique et politique d’importation parallèle optimale .
Author(s) -
Roy Santanu,
Saggi Kamal
Publication year - 2012
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.1540-5982.2012.01735.x
Subject(s) - duopoly , economics , monopoly , incentive , microeconomics , competition (biology) , profit (economics) , welfare , competition policy , profit margin , commercial policy , price discrimination , industrial organization , international economics , cournot competition , market economy , ecology , biology , finance
Abstract In a two‐country Hotelling type duopoly model of price competition, we show that parallel import (PI) policy can act as an instrument of strategic trade policy. The home firm’s profit is higher when it cannot price discriminate internationally if and only if the foreign market is sufficiently bigger than the domestic one. The key mechanism in the model is that the home firm’s incentive to keep its domestic price close to the optimal monopoly price affects its behavior during price competition abroad. We also analyze the welfare implications of PI policies and show that our key insights extend to quantity competition.