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Gray-market trade with product information service in global supply chains
- Source :
- International Journal of Production Economics. 147:351-361
- Publication Year :
- 2014
- Publisher :
- Elsevier B.V., 2014.
-
Abstract
- This paper investigates the economic effects of a product information service when potential consumers, who are segmented by their taste, exist in gray markets. Specifically, we construct an economic model that considers a multinational firm (MNF) who expands business to a country and chooses whether to provide information service regarding product characteristics. If receiving the information, consumers in a specific segment, whose taste suits the characteristics, have positive utility from consuming the product, while those in other segments have no utility. By contrast, consumers in all segments have positive expected utility before consuming the product without information. With these settings, we demonstrate that there arises the equilibrium that the MNF provides no information service when gray-market trade, i.e., parallel trade, is allowed in the country, leading to lower consumer welfare than when it is prohibited. A primary finding in the equilibrium is that such a situation arises especially when potential consumers are less segmented. In this situation, the regulator in the country should ban the parallel imports so as to enhance consumer welfare. The result is counterintuitive and notable, because one might intuitively infer that gray-market trade is less desirable when customers are more minutely segmented and the product information service is thus more specific and necessary. (C) 2013 Elsevier B.V. All rights reserved.
- Subjects :
- Service (business)
Economics and Econometrics
Service product management
Supply chain
Customer segmentation
Grey market
Management Science and Operations Research
General Business, Management and Accounting
Industrial and Manufacturing Engineering
Global supply chain
Commerce
Market segmentation
Product information service
Economics
Gray market
Economic model
Product (category theory)
Parallel trade
Industrial organization
Expected utility hypothesis
Subjects
Details
- Language :
- English
- ISSN :
- 09255273
- Volume :
- 147
- Database :
- OpenAIRE
- Journal :
- International Journal of Production Economics
- Accession number :
- edsair.doi.dedup.....9e33b212cb8c3a0ccb8b4492ccbbb898