Parallel Trade, Quality Investments, and Regulation
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A manufacturer investing in product quality sells the good directly in her country, and abroad through an independent firm that practices international arbitrage (Parallel Trade). We show that: i) PT may increase investments if the re-imported product is of lower quality than the domestic product, but reduces investments with perfect substitutes; ii) price regulation (with PT) dilutes this result, since it anyhow raises investments when the investment cost is not too convex; iii) the regulated price determines whether the regulated country receives quality, but does not marginally affect investments. These findings lighten concerns about the long-run welfare effects of PT.
pagine: 40
formato: 17 x 24
ISBN: 978-88-548-0286-5
data pubblicazione: Novembre 2005
editore: Aracne
collana: Dipartimento di Informatica e Sistemistica “Antonio Ruberti” della “Sapienza” Università di Roma | 2005/5
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