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Marissa Ginn, Marc Van Audenrode, Mar 26, 2014
In its most recent budget released on February 11, 2014, the Government of Canada announced its intent to introduce new legislation guarding against what it terms “unjustified cross-border price discrimination” resulting from “country pricing strategies-that is, when companies use their market power to charge higher prices in Canada that are not reflective of legitimate higher costs.” Some evidence exists that Canadians pay more than Americans for identical goods: recent estimates from various sources of the Canada-U.S. price gap range from 10 to 25 percent, after adjusting for sales tax differentials.
In this article, we discuss the potential economic factors driving such price differentials, and provide our views, as economists, on the implications of this proposed amendment to the Competition Act on consumers and on the Canadian economy.