Parallel imports and piracy in a North-South model

We consider welfare effects of parallel imports under a possibility of piracy, by constructing a model where a monopoly firm sells its product in a developed country and in a developing country. We show that parallel imports do not always make the firm worse off and consumers better off. Sometimes parallel imports benefit both the firm and consumers, irrespective of the existence of piracy. However, piracy makes parallel imports more preferable to consumers and less preferable to the firm. We also suggest that a developing country's policy on piracy can be internationally coordinated with a developed country's policy on parallel imports, so as to improve the welfare of these countries.