2021•Economics LettersOpen access

The effects of parallel trade in two-sided markets

Kuo‐Feng Kao, Hiroshi Mukunoki

Abstract

This study investigates the effects of parallel imports in two-sided markets, which may increase profits for manufacturers when products have a two-sided market nature. Additionally, parallel imports increase consumer surplus and social welfare in all countries if the network externalities from both sides are large enough. However, if one externality is small while the other is large, parallel imports can hurt consumers and welfare in all countries.

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Available abstract

Key concepts: Externality, Economic surplus, Welfare, Economics, Network effect, International economics, Gains from trade, Microeconomics