Parallel trade, product quality, and welfare

We study the welfare effects of parallel trade (PT) considering investment in quality. We thus revisit the case for PT in research-intensive industries. We find that PT may raise quality, depending on how preferences for quality differ across countries. Conditional on quality, consumer surplus may rise (fall) in the PT-source (PT-recipient) country. While PT reduces ex post welfare, improving quality is a necessary condition for PT to increase welfare ex ante.

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Year of publication:	2014
Authors:	Matteucci, Giorgio ; Reverberi, Pierfrancesco
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 122.2014, 2, p. 258-262
Publisher:	Elsevier
Subject:	Parallel trade \| Price discrimination \| R&D investment \| Intellectual property rights

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Type of publication:	Article
Classification:	L12 - Monopoly; Monopolization Strategies ; F13 - Commercial Policy; Protection; Promotion; Trade Negotiations ; O34 - Intellectual Property Rights: National and International Issues
Source:	RePEc - Research Papers in Economics

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