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When does grey market occur? A Cournot duopoly model of intrabrand competition

Author

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  • Bruce C.Y. Lee
  • C-T. Hsiao

Abstract

Grey markets have troubled international businesses for many years. The main suppliers of grey-market goods are diverters, who obtain brand-owner's authorisation at one country and sells branded goods to a grey marketer at another country in which they are not authorised. This paper proposes a duopoly model that takes the diverter's point of view to answer the unsolved questions in grey marketing. The equilibrium solution is obtained by Cournot assumption, which assumes that each firm acts independently and attempts to maximise its profits by choosing its output. The extension and implications of this model are also discussed.

Suggested Citation

  • Bruce C.Y. Lee & C-T. Hsiao, 2008. "When does grey market occur? A Cournot duopoly model of intrabrand competition," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 2(2), pages 201-214.
    • Handle: RePEc:ids:ijrevm:v:2:y:2008:i:2:p:201-214
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