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Parallel importation and price competition in a duopoly supply chain

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  • Hassan Shavandi
  • Siavash Valizadeh Khaki
  • Majid Khedmati

Abstract

Nowadays, diversion of products distribution from authorised channels to the gray markets is one of the main challenges of manufacturers. Suppose an international supplier distributes the products in several countries with different prices. In parallel importation, there are unauthorised distributers who supply products with a lower price and import them to a higher price market. The problem of parallel importation considering a manufacturer and a competitor is analysed using the game theory approach in this article. We investigate the pricing strategy for manufacturers and the effect of unauthorised distributer on price, market share and profit. We also investigate the performance of different policies in a numerical study and show managerial insights.

Suggested Citation

  • Hassan Shavandi & Siavash Valizadeh Khaki & Majid Khedmati, 2015. "Parallel importation and price competition in a duopoly supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 53(10), pages 3104-3119, May.
    • Handle: RePEc:taf:tprsxx:v:53:y:2015:i:10:p:3104-3119
    DOI: 10.1080/00207543.2014.974841
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    Cited by:

    1. Li, Hai & Shao, Jing & Zhu, Stuart X., 2020. "Impacts of power dynamics and gray markets on supply chains," International Journal of Production Economics, Elsevier, vol. 222(C).
    2. Abhishek Srivastava & Arqum Mateen & Gopalakrishnan Narayanamurthy & Suman Niranjan & Ashutosh Sarkar, 2024. "Impact of gray markets on strategic channel choice and social welfare," Annals of Operations Research, Springer, vol. 340(2), pages 1035-1062, September.
    3. Kim, Bosung & Park, Kun Soo, 2016. "Organizational structure of a global supply chain in the presence of a gray market: Information asymmetry and valuation difference," International Journal of Production Economics, Elsevier, vol. 175(C), pages 71-80.
    4. Evelyn O. Smith & Jeffrey D. Shulman, 2022. "Product diversion by vertically differentiated firms," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 1928-1939, May.
    5. Wang, Yingjia & Lin, Jiaxin & Choi, Tsan-Ming, 2020. "Gray market and counterfeiting in supply chains: A review of the operations literature and implications to luxury industries," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    6. Zhang, Yong & Zhang, Sheng Hao & Feng, Haofang, 2021. "The impacts of money-back guarantees in the presence of parallel importation," European Journal of Operational Research, Elsevier, vol. 295(1), pages 170-182.

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