An elementary proposition concerning parallel imports

This paper demonstrates that, when countries individually choose whether or not to prohibit parallel imports, a global Nash equilibrium involves the p ermitting of parallel importing into all relevant foreign markets i.e. glob al uniform pricing. This result is sensitive in a straightforward way to th e tariff-setting powers of countries and to the specification of a governme nt's objective function (i.e. political economy considerations). We also sh ow that when countries can prevent 'parallel exports' then any Nash equilib rium involves global price discrimination. (C) 2002 Elsevier Science B.V. A ll rights reserved.