Parallel Imports and Repair Services

Author Name ISHIKAWA Jota (Faculty Fellow, RIETI) / MORITA Hodaka (University of New South Wales) / MUKUNOKI Hiroshi (Gakushuin University)
Creation Date/NO. May 2015 15-E-060
Research Project Trade and Industrial Policies in a Complex World Economy
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This study investigates the effect of parallel imports when the producer of a durable good may refuse to provide repair and maintenance services for parallel imported units, or charge higher prices for those services. By doing so, the producer is able to weaken intra-brand competition and reduce the degree of market integration, thereby mitigating the negative effect of parallel imports on profits. Although the lower degree of market integration increases the producer's profit, it does not always mean that the producer wants to improve the durability of the product. If the producer invests in improving the durability of the good, the service discrimination against the parallel imported units could lower the durability of the product. In this case, consumers in the importing country may suffer by permitting parallel imports, and the negative effect is amplified by trade liberalization.

Published: Ishikawa, Jota, Hodaka Morita, and Hiroshi Mukunoki, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Vol. 172, pp. 137-160