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International pricing with costly consumer arbitrage

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  • Simon P. Anderson
  • Victor Ginsburgh

Abstract

Consumer arbitrage affects international pricing in several ways. If all consumers face the same arbitrage costs, a monopolist’s profit increases with arbitrage costs, and world welfare declines with them (if output does not rise). If arbitrage costs differ across consumers, a monopolist may sell in a second country even if there is no local demand—it can use the second country to discriminate across consumers in the first country. Again, world welfare typically falls with arbitrage costs. When there is also local demand in the second country, world welfare may be increasing in arbitrage costs, even if output falls.

Suggested Citation

  • Simon P. Anderson & Victor Ginsburgh, 1999. "International pricing with costly consumer arbitrage," ULB Institutional Repository 2013/1699, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/1699
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    1. Friberg, Richard & Steen, Frode & Ulsaker, Simen Aardal, 2024. "Cross-border shopping of alcohol – What is the effect on tax revenue and sales and which products are most affected?," Discussion Paper Series in Economics 12/2024, Norwegian School of Economics, Department of Economics.
    2. Feuerstein Switgard, 2002. "Home Bias, internationale Preisdifferenzierung und Wirtschaftsintegration / Home Bias, International Price Discrimination and Economic Integration," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(1), pages 112-131, February.
    3. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.
    4. Friberg, Richard, 2001. "Two monies, two markets?: Variability and the option to segment," Journal of International Economics, Elsevier, vol. 55(2), pages 317-327, December.
    5. Teodora Cosac, 2004. "Vertical Restraints and Parallel Imports with Differentiated Products," Industrial Organization 0401006, University Library of Munich, Germany.
    6. Braouezec, Yann, 2012. "Customer-class pricing, parallel trade and the optimal number of market segments," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 605-614.
    7. Noriaki Matsushima & Toshihiro Matsumura, 2010. "Profit-Enhancing Parallel Imports," Open Economies Review, Springer, vol. 21(3), pages 433-447, July.
    8. Joan Costa-Font, 2016. "Is medicines parallel trade ‘regulatory arbitrage’?," International Journal of Health Economics and Management, Springer, vol. 16(4), pages 321-336, December.
    9. Bruno Larue & Sébastien Pouliot & Christos Constantatos, 2009. "Exports to Smuggle and Smuggling Technologies," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 476-493, August.
    10. Matthew Burgess & Lewis Evans, 2005. "Parallel Importation And Service Quality: An Empirical Investigation Of Competition Between Dvds And Cinemas In New Zealand," Journal of Competition Law and Economics, Oxford University Press, vol. 1(4), pages 747-770.
    11. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2000. "E-commerce and prices - theory and evidence," SSE/EFI Working Paper Series in Economics and Finance 389, Stockholm School of Economics, revised 08 Sep 2000.
    12. Evelyn O. Smith & Jeffrey D. Shulman, 2022. "Product diversion by vertically differentiated firms," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 1928-1939, May.
    13. Kyle Margaret, 2011. "Strategic Responses to Parallel Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-34, January.
    14. Hamilton, Jonathan H., 2012. "The effect of Canadian imports on prescription drug prices in the U.S," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1003-1008.
    15. Saeed Heravi & Kerry Patterson, 2005. "Optimal And Adaptive Semi‐Parametric Narrowband And Broadband And Maximum Likelihood Estimation Of The Long‐Memory Parameter For Real Exchange Rates," Manchester School, University of Manchester, vol. 73(2), pages 165-213, March.
    16. Séverine HALLER & Marie-Hélène JEANNERET, 2003. "Importations parallèles sur le marché automobile européen : une analyse en termes de différentiation verticale," Discussion Papers (REL - Recherches Economiques de Louvain) 2003024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    17. Obradovits, Martin, 2017. "Search and segregation," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 137-165.
    18. Séverine Haller & Marie-Hélène Jeanneret, 2003. "Importations parallèles sur le marché automobile européen : une analyse en termes de différenciation verticale," Recherches économiques de Louvain, De Boeck Université, vol. 69(2), pages 181-204.
    19. Hsiu-Li Chen, 2009. "Gray Marketing: Does It Hurt the Manufacturers?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 23-35, March.
    20. Jota Ishikawa, 2004. "From Segmented Markets to Integrated Markets: an Analysis of Economic Integration and Antidumping Legislation," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 706-722, September.
    21. Georgia Kosmopoulou & Qihong Liu & Jie Shuai, 2016. "Customer poaching and coupon trading," Journal of Economics, Springer, vol. 118(3), pages 219-238, July.
    22. Guillaume Gaulier & Séverine Haller, 2000. "The Convergence of Automobile Prices in the European Union: an Empirical Analysis for the Period 1993-1999," Working Papers 2000-14, CEPII research center.
    23. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2001. "Pricing Strategies in E-Commerce: Bricks vs. Clicks," Working Paper Series 559, Research Institute of Industrial Economics.

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