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. (C) 2013 Elsevier B.V. All rights reserved.
Parallel trade, product quality, and welfare / Matteucci, Giorgio; Reverberi, Pierfrancesco. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - 122:2(2014), pp. 258-262. [10.1016/j.econlet.2013.12.004]
Parallel trade, product quality, and welfare
MATTEUCCI, Giorgio;REVERBERI, Pierfrancesco
2014
Abstract
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. (C) 2013 Elsevier B.V. All rights reserved.| File | Dimensione | Formato | |
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