Parallel Imports in a Model of Vertical Distribution: Theory, Evidence and Policy

16 Pages Posted: 15 Feb 2003

See all articles by Keith E. Maskus

Keith E. Maskus

University of Colorado at Boulder - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Yongmin Chen

University of Colorado at Boulder - Department of Economics

Abstract

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.

Suggested Citation

Maskus, Keith E. and Chen, Yongmin, Parallel Imports in a Model of Vertical Distribution: Theory, Evidence and Policy. Pacific Economic Review, Vol. 7, pp. 319-334, 2002. Available at SSRN: https://ssrn.com/abstract=316227

Keith E. Maskus (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-7588 (Phone)
303-492-8960 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yongmin Chen

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-8736 (Phone)
303-492-8960 (Fax)

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