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Oxford Economic Papers Advance Access originally published online on May 22, 2006
Oxford Economic Papers 2006 58(3):549-568; doi:10.1093/oep/gpl013
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© Oxford University Press 2006

Tariff policy and exhaustion of intellectual property rights in the presence of parallel imports

Jung Hur*, and Yohanes E. Riyanto{dagger},

*Department of Economics, National University of Singapore
{dagger}Department of Economics, National University of Singapore, AS2 Level 6, 1 Arts Link, Singapore 117570

Correspondence: e-mail: ecshurj{at}nus.edu.sg

Correspondence: e-mail: ecsrye{at}nus.edu.sg

This paper examines an interplay between tariff policy and parallel-import policy. From a welfare point of view, a host government would prefer allowing parallel imports to prohibiting them. However, if a tariff is not at the government's disposal, there will be no parallel imports in equilibrium because a foreign manufacturer would prefer adopting a uniform pricing policy to a discriminatory pricing policy, which will prevent parallel imports from occurring. If a tariff is at the government's disposal, it can be set optimally to induce the foreign manufacturer to impose a price discrimination policy. Such a policy will facilitate entry by a parallel importer provided that parallel imports are feasible.

Key Words: JEL classification: D43 • F13 • L11


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