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Gray Marketing: Does It Hurt the Manufacturers?

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  • Hsiu-Li Chen

Abstract

It is generally believed that the existence of gray channels hurts authorized retailers because gray marketers often free-ride on the marketing activities performed by authorized retailers. However, the effect on manufacturers’ profits is still rather vague. This paper sets up a two-stage sub-game perfect equilibrium model to examine the effects of gray goods on authorized retailers and manufacturers. It is found that manufacturers who are against parallel importation are likely to be those whose product has a low gray good penetration ratio, low price elasticity of demand, high cross-price elasticity of demand, or a high demand convexity. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • Hsiu-Li Chen, 2009. "Gray Marketing: Does It Hurt the Manufacturers?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 23-35, March.
    • Handle: RePEc:kap:atlecj:v:37:y:2009:i:1:p:23-35
    DOI: 10.1007/s11293-008-9154-6
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    References listed on IDEAS

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    Cited by:

    1. Iravani, Foad & Dasu, Sriram & Ahmadi, Reza, 2016. "Beyond price mechanisms: How much can service help manage the competition from gray markets?," European Journal of Operational Research, Elsevier, vol. 252(3), pages 789-800.
    2. Zhang, Jianqiang, 2016. "The benefits of consumer rebates: A strategy for gray market deterrence," European Journal of Operational Research, Elsevier, vol. 251(2), pages 509-521.

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    More about this item

    Keywords

    Parallel imports; Authorized retailers; Gray goods; D21; F10; M00; M31;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F10 - International Economics - - Trade - - - General
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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