IDEAS home Printed from https://ideas.repec.org/a/bla/scotjp/v53y2006i3p377-397.html
   My bibliography  Save this article

Competition, Parallel Imports And Cost‐Reducing Innovation

Author

Listed:
  • Changying Li

Abstract

Incorporating parallel imports (PI), we develop a two‐country two‐firm model which relates to the incentives for cost‐reducing innovation. We show that PI may facilitate or inhibit the manufacturers' incentives to innovate. In particular, PI could encourage both firms' innovations. The difference between the manufacturer's profits under successful innovation and failed innovation is either a U‐shaped curve or an inverted U‐shaped curve in terms of the cost of engaging in PI. As these differences reflect the manufacturers' incentive to innovate, the variations in R&D investment depend on transportation cost, and firms' marginal costs before and after successful innovations.

Suggested Citation

  • Changying Li, 2006. "Competition, Parallel Imports And Cost‐Reducing Innovation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 377-397, July.
    • Handle: RePEc:bla:scotjp:v:53:y:2006:i:3:p:377-397
    DOI: 10.1111/j.1467-9485.2006.00385.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9485.2006.00385.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9485.2006.00385.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrea Mantovani & Alireza Naghavi, 2010. "Parallel Imports and Innovation in an Emerging Economy," Center for Economic Research (RECent) 038, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    2. Arijit Mukherjee & Laixun Zhao, 2012. "Profitable parallel trade in unionized markets," Journal of Economics, Springer, vol. 107(3), pages 267-276, November.
    3. Civan Abdulkadir & Maloney Michael T., 2009. "The Effect of Price on Pharmaceutical R&D," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-24, April.
    4. Stähler, Frank & Maskus, Keith, 2013. "Retailers as Agents and the Absence of Parallel Trade," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79737, Verein für Socialpolitik / German Economic Association.
    5. Maskus, Keith E. & Stähler, Frank, 2014. "Retailers as agents and the limits of parallel trade," European Economic Review, Elsevier, vol. 70(C), pages 186-196.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Birg, Laura, 2019. "Parallel imports and manufacturer rebates: Evidence from Germany," University of Göttingen Working Papers in Economics 363, University of Goettingen, Department of Economics.
    2. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact Of Parallel Imports: A Structural Approach Applied To The German Market For Oral Anti‐Diabetics," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1036-1057, September.
    3. Laura Birg, 2015. "Externalities of National Pharmaceutical Policy when Markets are Integrated through Parallel Trade," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 558-574, August.
    4. David Granlund, 2022. "Direct and indirect savings from parallel imports in Sweden," Health Economics Review, Springer, vol. 12(1), pages 1-14, December.
    5. Opriş Mircea Constantin & Deselnicu Dana Corina & Crasoveanu Fowzi-Constantin, 2023. "Romanian Market Strategies in the Pharmaceutical Industry," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 17(1), pages 1404-1412, July.
    6. Birg, Laura, 2018. "Parallel Imports and Manufacturer Rebates," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181646, Verein für Socialpolitik / German Economic Association.
    7. Hans Gersbach & Hans Haller, 2018. "Hierarchical Trade," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1165-1184, April.
    8. Li, Hai & Shao, Jing & Zhu, Stuart X., 2018. "Parallel importation in a supply Chain: The impact of gray market structure," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 114(C), pages 220-241.
    9. Nikolsko-Rzhevskyy, Alex & Ogrokhina, Olena, 2018. "Behavior of retail prices in common currency areas: The case of the Eurozone," Economic Modelling, Elsevier, vol. 69(C), pages 49-57.
    10. Frank Hefner & Mark David Witte, 2016. "Does Leaving the Eurozone Mean Leaving the Euro?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(3), pages 279-294, August.
    11. Laura Birg, 2023. "Parallel imports under a manufacturer rebate and a price freeze: Evidence from Germany," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 302-323, February.
    12. Raimondos-Møller, Pascalis & Schmitt, Nicolas, 2010. "Commodity taxation and parallel imports," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 153-162, February.
    13. Abhishek Srivastava & Arqum Mateen & Gopalakrishnan Narayanamurthy & Suman Niranjan & Ashutosh Sarkar, 2024. "Impact of gray markets on strategic channel choice and social welfare," Annals of Operations Research, Springer, vol. 340(2), pages 1035-1062, September.
    14. Birg, Laura, 2013. "Pharmaceutical regulation at the wholesale level and parallel trade," University of Göttingen Working Papers in Economics 180, University of Goettingen, Department of Economics.
    15. Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March.
    16. McCalman, Phillip, 2010. "Trade policy in a "super size me" world," Journal of International Economics, Elsevier, vol. 81(2), pages 206-218, July.
    17. Andrea Mantovani & Alireza Naghavi, 2010. "Parallel Imports and Innovation in an Emerging Economy," Center for Economic Research (RECent) 038, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    18. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.
    19. Andrea Mantovani & Alireza Naghavi, 2012. "Parallel Imports And Innovation In An Emerging Economy: The Case Of Indian Pharmaceuticals," Health Economics, John Wiley & Sons, Ltd., vol. 21(11), pages 1286-1299, November.
    20. Santanu Roy & Kamal Saggi, 2012. "Strategic competition and optimal parallel import policy," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1369-1396, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:scotjp:v:53:y:2006:i:3:p:377-397. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sesssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.