Open Economies Review

, Volume 21, Issue 3, pp 433–447 | Cite as

Profit-Enhancing Parallel Imports

Research Article

Abstract

We investigate competition between a domestic intellectual property right holder and a foreign imitator and consider how parallel imports affect their profits. We consider a two-country model. Country A is a developed country where intellectual property rights are highly protected, and country B is a developing country where protection is weak. The intellectual property right holder can sell the products for both markets while the imitator cannot export the products to country A. We find that permitting parallel imports can be beneficial for both players because it serves as a commitment device to soften price competition.

Keywords

Parallel imports Profits Intellectual property rights 

JEL Classification

F12 K33 L13 

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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Graduate School of Business AdministrationKobe UniversityKobeJapan
  2. 2.Institute of Social ScienceUniversity of TokyoTokyoJapan

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