The effects of parallel trade in two-sided markets

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. •Parallel imports (PIs) may increase manufacturer profits in two-sided markets.•Such PIs benefit consumers and improve manufacturer country’s welfare.•For large network externalities, PIs increase consumer surplus and social welfare.•For a small network externality on one side, PIs hurt consumers and social welfare.