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Parallel trade has attracted substantial attention and been
investigated extensively in the literature. The most studies show that
allowing parallel trade decreases the profit of manufacturer, because
parallel trade intensifies competition in the home market. In this paper we will focus on the
impact of allowing PI on the manufacturer¡¦s profit and social welfare. Assume
that the manufacturer and the distributor compete in Bertrand fashion in the
case of PI. This paper shows that a manufacturer may benefit from parallel
trade. Moreover, we show that under these circumstances PI is welfare
improving.
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