Pricing in separable channels: the case of parallel imports

Multinational companies marketing their undifferentiated products to different countries unintentionally may create a problem for themselves. A low price in one country may encourage an enterprise to transship the products to another country with higher price, creating a new channel of parallel imports that competes with the authorized channels there. By setting prices reflecting differences in willingness to pay in the different countries, multinational firms are “setting” prices for their products in separable channels. In light of this problem of parallel import channels competing with the authorized channels, multinationals need to carefully establish their pricing strategies for the global marketplace.