Parallel imports, demand dispersion, and international price discrimination

Malueg, David A.; Schwartz, Marius

doi:10.1016/0022-1996(94)90044-2

“…At the same time, we generalize their setting by allowing for a continuum of markets and that not all markets are served. Our results also extend the findings of Malueg and Schwartz (1994), who consider a continuum of markets each having a linear demand that varies with a multiplicative term, which turns out to be a special case of ours. Moreover, we go beyond purely theoretical discussions by calibrating our model to the data from Amazon's marketplace and Visa's signature debit cards.…”

Section: Introductionsupporting

confidence: 72%

“…Then the problem is stated in exactly the same form as the third-degree price discrimination problem analyzed by Malueg and Schwartz (1994), except that we allow inverse demand to be multiplied by a constant positive parameter and we allow that the uniform distribution on c does not have to be centered at unity. 7 It turns out what matters for Malueg and Schwartz's results is the ratio of the highest to lowest value of c in the support of the distribution, i.e.…”

Section: Linear Demandmentioning

confidence: 99%

Should Platforms be Allowed to Charge Ad Valorem Fees?

Wang

¹

,

Wright

²

2017

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Many platforms that facilitate transactions between buyers and sellers charge ad valorem fees in which fees depend on the transaction price set by sellers. Given these platforms do not incur significant costs that vary with transaction prices, their use of ad valorem fees has raised controversies about the efficiency of this practice. In this paper, using a model that connects platforms' use of ad valorem fees to third-degree price discrimination, we evaluate the welfare consequences of banning such fees. We find the use of ad valorem fees generally increases welfare, including for calibrated versions of the model based on data from Amazon's marketplace and Visa's signature debit cards.JEL classification: D4, H2, L5

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“…In the first category of models, which is the subject of the following section, parallel trade is horizontal arbitrage that limits the scope for international price discrimination (Malueg and Schwartz, 1994). A firm with market power has an incentive to set prices across markets that reflect differences in willingness to pay for its good.…”

Section: D Preliminary Matters On the Economics Of Pimentioning

confidence: 99%

“…This case is clearly relevant for international trade. Malueg and Schwartz (1994) present a model with a continuum of countries and compare price discrimination, a uniform price, and a mixed regime with uniform prices in subsets of markets but potential price discrimination between different groups of markets.…”

mentioning

confidence: 99%

Intellectual Property Rights, Parallel Imports and Strategic Behavior

Maskus

¹

,

Ganslandt

²

2007

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe existence of parallel imports (PI) raises a number of interesting policy and strategic questions, which are the subject of this survey article. For example, parallel trade is essentially arbitrage within policy-integrated markets of IPR-protected goods, which may have different prices across countries. Thus, we analyze fully two types of price differences that give rise to such arbitrage. First is simple retail-level trade in horizontal markets because consumer prices may differ. Second is the deeper, and more strategic, issue of vertical pricing within the common distribution organization of an original manufacturer selling its goods through wholesale distributors in different markets. This vertical price control problem presents the IPR-holding firm a menu of strategic choices regarding how to compete with PI. Another strategic question is how the existence of PI might affect incentives of IPR holders to invest in research and development (R&D). The global research-based pharmaceutical firms, for example, strongly oppose any relaxation of restrictions against PI of drugs into the United States, arguing that the potential reduction in profits would diminish their ability to innovate. There is a close linkage here with price controls for medicines, which are a key component of national health policies but can give rise to arbitrage through PI. We also discuss the complex economic relationships between PI and other forms of competition policy, or attempts to limit the abuse of market power offered by patents and copyrights. Finally, we review the emerging literature on how policies governing PI may affect international trade agreements.

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“…5 on the welfare e¤ects of price discrimination when compared with a regime which bans price discrimination. Moreover, our analysis is related to Malueg and Schwartz (1994) and Anderson and Ginsburgh (1999) who studied a monopolist's pricing decision and the associated welfare e¤ects in the presence of parallel trade.…”

mentioning

confidence: 99%

Mergers in Imperfectly Segmented Markets

Baake

¹

,

Wey

²

2009

SSRN Journal

0

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in September 2009Abstract We present a model with …rms selling (homogeneous) products in two imperfectly segmented markets (a "high-demand" and a "low-demand" market). Buyers are mobile but restricted by transportation costs, so that imperfect arbitrage occurs when prices di¤er in both markets. We show that equilibria are distorted away from Cournot outcomes to prevent consumer arbitrage. Furthermore, a merger can lead to an equilibrium in which only the "high-demand" market is served. This is more likely (i) the lower consumers'transportation costs and (ii) the higher the concentration of the industry. Therefore, merger incentives are much larger than standard analysis suggests.JEL-Classi…cation: D43, L13, L41

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Parallel imports, demand dispersion, and international price discrimination

Cited by 194 publications

References 11 publications

Should Platforms be Allowed to Charge Ad Valorem Fees?

Should Platforms be Allowed to Charge Ad Valorem Fees?

Intellectual Property Rights, Parallel Imports and Strategic Behavior

Mergers in Imperfectly Segmented Markets

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