International Integration of Used Markets with a Monopoly Producer

We study the impact of restrictions on trade in used goods between countries in the presence of a monopolistic seller that sells in two different national markets. Contrasting with the non-durable good case, free trade in used goods may be optimal for the firm. We provide a characterization of how movements towards trade liberalization, when implemented with a quota, will affect equilibrium outcomes. A necessary condition for profits to increase with trade in used goods is that the goods be imported to the country with the lower price of new goods. We show that when small movements away from autarky raise profits for the firm, the optimal level of secondary market integration is free trade. The opposite, however, may not hold. While small movements away from autarky may not raise profits, free trade may still be the optimal level of secondary