Abstract
National regulation generates price differentials between countries stimulating arbitrage by international distributors. Harmed manufacturers counteract using vertical price-squeeze or non-price discrimination. We show that: (i) either under regulatory commitment or discretion, there are non-linear relationships between technology/market conditions and the first-mover’s pricing strategy; (ii) public service obligations on distributors allow regulators to manipulate parallel exports so as to improve national welfare; (iii) to prevent sabotage, regulation should provide manufacturers with adequate countervailing incentives; (iv) coordinating national agencies alleviates negative regulatory and market externalities. Therefore, static and dynamic efficiency concerns may arise within a regional exhaustion regime of intellectual property rights.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
T. R. Beard D. L. Kaserman J. W. Mayo (2003) ArticleTitle“On the Impotence of Imputation” Telecommunications Policy 27 585–595 Occurrence Handle10.1016/S0308-5961(03)00066-1
G. Biglaiser P. DeGraba (2001) ArticleTitle“Downstream Integration by a Bottleneck Input Supplier whose Regulated Wholesale Prices are Above Costs” RAND Journal of Economics 32 302–315
J. A. Brander (1995) “Strategic Trade Policy” G. M. Grossman K. S. Rogoff (Eds) Handbook of International Economics North-Holland Amsterdam
G. Calzolari (2001) ArticleTitle“The Theory and Practice of Regulation with Multinational Enterprises” Journal of Regulatory Economics 20 191–211 Occurrence Handle10.1023/A:1011107413701
Y. Chen K. Maskus (2004) ArticleTitle“Vertical Price Control and Parallel Imports: Theory and Evidence” Review of International Economics 12 551–570 Occurrence Handle10.1111/j.1467-9396.2004.00467.x
CJ – Court of Justice. 2004. Bundesverband der Arzneimittel-Importeure and Commission of the European Communities vs. Bayer AG. Joined Cases C-2/01 P and C-3/01 P. 6 January 2004.
P. Danzon (1997) ArticleTitle“Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU” International Journal of the Economics of Business 4 301–322
EC – European Commission. 1998. The single market in pharmaceuticals. Brussels. COM(98)588.
EP – European Parliament and the Council of European Union. 2001. rective on the Community code relating to medicinal products for human use. Brussels. 2001/83/EC.
FT – Financial Times. 2001a. Drug companies hit out at French price controls. June 10, 2001.
FT – Financial Times. 2001b. GSK may fight EU ruling on Spanish exports. May 8, 2001.
FT – Financial Times 2001c. Glaxo restricts exports to protect UK market. December 30, 2001.
D. A. Malueg M. Schwartz (1994) ArticleTitle“Parallel Imports, Demand Dispersion, and International Price Discrimination” Journal of International Economics 37 167–196 Occurrence Handle10.1016/0022-1996(94)90044-2
D. M. Mandy (2000) ArticleTitle“Killing the Goose that may have Laid the Golden Egg: Only the Data know Whether Sabotage Pays” Journal of Regulatory Economics 17 157–172 Occurrence Handle10.1023/A:1008191911289
NERA, S. J. Berwin & Co., and IFF Research. 1999. The economic consequences of the choice of regime of exhaustion in the area of trademarks. London. Final Report for DG XV of the EC.
OECD. 2000.Competition and regulation issues in the pharmaceutical industry. Committee on Competition Law and Policy. DAFFE/CLP (2000) 29.
M. Richardson (2002) ArticleTitle“An elementary proposition concerning parallel imports” Journal of International Economics 56 233–245 Occurrence Handle10.1016/S0022-1996(01)00110-6
D. F. Spulber J. G. Sidak (1997) ArticleTitle“Network access pricing and deregulation” Industrial and Corporate Change 6 757–782
R. Veugelers (1993) ArticleTitle“Reputation as a Mechanism Alleviating Opportunistic Host Government Behavior Against MNEs” Journal of Industrial Economics XLI 1–17
D. L. Weisman J. Kang (2001) ArticleTitle“Incentives for Discrimination when Upstream Monopolists Participate in Downstream Markets” Journal of Regulatory Economics 20 125–139 Occurrence Handle10.1023/A:1011190911884
P. Zweifel F. Breyer (1997) Health Economics Oxford University Press New York
Author information
Authors and Affiliations
Corresponding author
Additional information
We are grateful to the Editor Michael A. Crew, an anonymous referee, and Luigi Buzzacchi for valuable comments and suggestions. We have benefited from financial support granted by MIUR-FIRB Project MAIS.
Rights and permissions
About this article
Cite this article
Matteucci, G., Reverberi, P. Price Regulation and Public Service Obligations under International Arbitrage. J Regul Econ 28, 91–113 (2005). https://doi.org/10.1007/s11149-005-2357-8
Issue Date:
DOI: https://doi.org/10.1007/s11149-005-2357-8