Strategic responses to parallel importing

Abstract

Parallel importing has traditionally been viewed as a consequence of the price discrimination practices undertaken by the manufacturers. This leads to prescriptions of antagonistic actions for both the manufacturers and the authorised distributors against the parallel importers, which may not be appropriate. In particular, prescriptions calling for the removal of the manufacturer's price discriminatory practices will not eliminate parallel importing if opportunity exists for the parallel importer to free-ride on the advertising and promotional efforts of the authorised distributor. We propose an alternative view of parallel importing, diagnosing it as a free-rider problem. This different perspective not only yields many useful insights into the parallel importing problem, but also provides marketing managers with decision rules as to how they should respond when confronted by this marketing phenomenon.