Intellectual Property Rights, Parallel Imports and Strategic Behavior

46 Pages Posted: 24 Apr 2007

See all articles by Mattias Ganslandt

Mattias Ganslandt

Centre for European Law and Economics; Research Institute of Industrial Economics; University of Colorado at Boulder - Department of Economics

Keith E. Maskus

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

Date Written: March 12, 2007

Abstract

The 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.

Keywords: IPR, parallel imports, international arbitrage, research and development

JEL Classification: F15, L14, K21

Suggested Citation

Ganslandt, Mattias and Maskus, Keith E., Intellectual Property Rights, Parallel Imports and Strategic Behavior (March 12, 2007). Available at SSRN: https://ssrn.com/abstract=982241 or http://dx.doi.org/10.2139/ssrn.982241

Mattias Ganslandt (Contact Author)

Centre for European Law and Economics ( email )

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Belgium
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+32 2 888 9161 (Fax)

HOME PAGE: http://www.celec.eu

Research Institute of Industrial Economics ( email )

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S-102 15 Stockholm
Sweden
+46 8 665 4500 (Phone)
+46 8 665 4599 (Fax)

HOME PAGE: http://www.industrialeconomics.se/mg

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

Campus Box 256
Boulder, CO 80309
United States
303-4927588 (Phone)

HOME PAGE: http://www.mattiasganslandt.com

Keith E. Maskus

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

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