Price Regulation and Public Service Obligations under International Arbitrage

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...

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Bibliographic Details
Published in:	Journal of regulatory economics 2005-07, Vol.28 (1), p.91-113
Main Authors:	Matteucci, Giorgio, Reverberi, Pierfrancesco
Format:	Article
Language:	eng
Subjects:	Arbitrage Business strategies Consumers Costs Distributors Economic models Economics Intellectual property Intellectual property rights International market International trade Manufacturers Mathematical methods Pharmaceutical industry Price discrimination Price regulations Prices Public sector Public services Regulation Regulatory policy Sales Studies Wage & price controls Wholesalers
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Summary:	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. [PUBLICATION ABSTRACT]
ISSN:	0922-680X 1573-0468