PARALLEL IMPORTS, DEMAND DISPERSION, AND INTERNATIONAL PRICE-DISCRIMINATION

Parallel imports, goods imported by unauthorized resellers, are advoca ted world-wide for undermining international price discrimination. For a continuum of markets, we find that uniform pricing by a monopolist yields lower global welfare than third-degree discrimination if demand dispersion across markets is 'large': though uniform pricing avoids o utput misallocation, too many markets go unserved. Mixed systems, perm itting discrimination across but not within designated groups of marke ts, yield significantly higher welfare than uniform pricing or unrestr icted multimarket discrimination, and can Pareto dominate uniform pric ing. Thus, while parallel imports might benefit some countries, our re sults weaken the (multilateral) case for allowing them.