Journal
QME-QUANTITATIVE MARKETING AND ECONOMICS
Volume 9, Issue 2, Pages 155-178Publisher
SPRINGER
DOI: 10.1007/s11129-011-9098-z
Keywords
Gray market; Parallel importation; Distribution channel; Channel structure; Pricing; Game theory
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Gray markets refer to the diversion of unauthorized products from a market or channel with low prices to another market or channel with higher prices. In this paper, we study the effects of gray markets on the profitability of distribution channel members under different channel structures with different parallel importer identities. We show that a manufacturer can benefit from parallel importation by a third party or by an authorized dealer. However, channel structure is critical in determining both who benefits and the mechanism by which this benefit occurs. In addition, we show whether the parallel importer is a third party or a retailer has significant effects on channel members' profits. Although this research is motivated by international marketing practices, the modeling approach and the results apply more generally to cases where a manufacturer sells to different customer segments at different prices.
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