Profitable gray market with asymmetric costs

Qing Hu () and Tomomichi Mizuno
Additional contact information
Qing Hu: Kushiro Public University of Economics

No 2319, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: When manufacturers sell their branded goods at different prices in different markets or channels, gray marketers buy goods in the low-priced market and resell them in the high-priced market to compete with the manufacturers' authorized sellers. Conventional wisdom suggests the lost sales in the high-priced market resulting from the gray market's diversion always make manufacturers worse off. However, by purely considering the marginal production cost in the high-priced market is higher than the low-priced market, we show that the manufacturer can gain from gray market, which contradicts to the conventional result. It happens when the marginal production cost in the high-priced market is sufficiently large (or the transaction cost for the gray marketer is sufficiently small in the linear demand case).

Pages: 12 pages
Date: 2023-11
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2023-1/2319.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.econ.kobe-u.ac.jp:443 (certificate verify failed) (http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2023-1/2319.pdf [301 Moved Permanently]--> https://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2023-1/2319.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:koe:wpaper:2319

Access Statistics for this paper

More papers in Discussion Papers from Graduate School of Economics, Kobe University Contact information at EDIRC.
Bibliographic data for series maintained by Kimiaki Shirahama ( this e-mail address is bad, please contact ).