Gray Market Research Articles

Risk Aversion, Shortage Economy, and Gender Differences in Religious Activities in China

The vast majority of studies in the sociology of religion show that women are more religious than men. We test a rather controversial conclusion that these differences stem from gender differences in risk aversion. Utilizing Yang's shortage economy perspective on religion in China, we argue that risk is inherent in gray market religious activities. From the risk aversion perspective, we hypothesize that women should participate in gray market less than men. Using the 2007 Spiritual Life Survey, a study of 7,021 respondents in the People's Republic of China, we model gender differences in the number of reported gray market religious activities during the previous 12 months. Our analysis fails to find support for the risk aversion hypothesis. We find that women report significantly more gray market activities than men, even after controlling for a variety of theoretically important variables. Implications for theory and research are discussed.

Alive and kicking

An overseas package holiday is a high-value purchase and a unique and complex service product with a fragmented experience, which can take place for several months or more. There is a gap in the experience literature on overseas package holidays, despite the fact that this industry generates approximately one third of all trips and expenditure in the United Kingdom. This article aims to increase the understanding of this service product and critically evaluate the consumer experience. The authors focus on ‘grey’ consumers who form a market segment that is growing in size and extremely important in the travel industry. However, it has been neglected in consumer behaviour literature that explores the experiential aspects of extended service encounters. Template analysis is used to identify six key categories that contribute to the package holiday experience of UK grey consumers holidaying in Tenerife. The six categories are the preholiday experience, travel and transit experience, self-made experience, provided experience, satisfaction, and loyalty. The grey market for package holidays is alive and kicking with many greys seeking fun, entertainment, enjoyment, and active participation in activities and meeting other guests. Undoubtedly, the Thomson Gold model, which disallows stays by those younger than 16 years, is highly suited to the needs of this market. The security and consumer protection offered by package holidays is highly important to these consumers who appear satisfied with the quality of their experience, which leads to exceptionally high levels of loyalty and repeat visits.

Gray Markets, A Product of Demand Uncertainty and Excess Inventory

Diverting large quantities of goods from authorized distribution channels to unauthorized or “gray market” channels, albeit legal, significantly affects both firms and consumers due to effects on price, revenue, service and warranty availability, and product availability. In this paper we consider mechanisms by which the uncertainty surrounding inventory ordering decisions drives gray markets. We start with a minimal stochastic supply chain model composed of a producer and a retailer; then we restructure the model to add a distributor whereby the distributor and authorized retailer have the option of diverting inventory to a gray market. Our analysis sheds light on three issues: impacts of diversion on the various supply chain participants, strategies producers could use to combat or exploit gray markets, and important considerations for authorized retailers trying to set optimal order quantities in the presence of a gray market. Our analysis yields new insights into the behavior and impact of gray markets, which can inform management strategies and policies for confronting them.

Drug Gray Market

Drug Gray Market

Negotiating care in the context of Finnish and Italian elder care policies.

Negotiation is an integral part of all elder care, which by definition involves a relation between at least two people. In this article, we analyse negotiations concerning elder care in the context of Finnish and Italian elder care policies. At the macro level negotiations on elder care are shaped by elder care policies and at the micro level by individual skills and resources. Our focus is on the negotiations on eligibility that take place when elders attempt to access care. The data consist of qualitative interviews with Finnish and Italian elders in need of care. The analysis of individual experiences of care negotiations reflects the practical consequences of elder care policies to older people. The results indicate that the most negotiated eligibility criteria when seeking access to elder care are need, money and social relations. These criteria are negotiated when seeking eligibility to different sources of care: informal care, grey market, market-based, non-profit and public services. In Italy, negotiation is particularly crucial when accessing grey market care. Cash as the main Italian elder care policy tool tends to enhance the role of and need for negotiation. In Finland, a greater part of elder care is provided by the public sector and therefore the process of negotiation is more standardized than in Italy.

PRACTICAL EXPERIENCE WITH LEGALIZED CANNABIS

Caulkins et al. astutely identify the major policy challenges confronting cannabis legalization, in particular the likelihood of dramatic price declines, the concomitant risk of increased consumption and abuse, and the difficulty of preventing diversion to the black market if significant taxes or other restrictions are imposed 1. The authors' prediction of dramatic cost reductions is confirmed by current experience in Israel, where medical cannabis gardens have been established under the supervision of the Health Ministry. The Israeli program produces high-grade medical cannabis outdoors at a cost of $.79/g ($22 per ounce), and sells it for up to $1.58/g ($44/oz) 2. This is equivalent to the authors' price estimate for indoor grow houses, and almost an order of magnitude lower than prevailing prices on the gray market in California. A different perspective is provided by the state-approved medical cannabis system in the Netherlands, where pharmacy-grade cannabis is grown indoors by Bedrocan BV under tightly regulated conditions and distributed through the Dutch Ministry of Health. Bedrocan's cannabis is currently sold at a price of €42.5/5 g (= $11.60/g, comparable to the price on the illicit market 3. The high price of Bedrocan's product is not due to taxes, but to the highly exacting pharmaceutical-grade production and testing conditions required by the Dutch government. Despite the high price, black market competition is not a problem, because cannabis is readily available at lower prices in coffee houses. Regulation should therefore be considered alongside taxation as a tool for maintaining prices. In addition to raising the costs of production, regulation raises prices through licensing fees that are passed on to consumers. An instructive historical example of successful regulation can be seen in the case of India, where cannabis was legally taxed and regulated in many states until recent decades. The Indian system was described in detail by the British Indian Hemp Drugs Commission report of 1893–94, which still stands today as the most thorough and exhaustive examination of cannabis regulation, albeit from a century ago. The commission examined the gamut of state regulatory systems in India with an eye on how to maximize tax revenues. State regimes ranged from complete prohibition to near laissez-faire, but typically involved some form of regulation, licensing or taxation. The Commission singled out Bengal as having the most successful regulatory regime. In Bengal, the state licensed production and sales and imposed both a duty and licensing fees. In 1892–93 the excise tax came to 2.9 rupees per pound, while license fees added 2.5 rupees more, accounting for about half the total retail price 2. Hemp–drug taxation was an important source of state revenues in Bengal, constituting 21% of excise revenues. The Commission concluded that a ‘combination of a fixed duty with license fees for the privilege of vend constitutes the best system of taxation for the hemp drugs’3. The Hemp Drugs Commission report provides useful insight into the economics of a legal cannabis market. Depending on the region and quality, the retail price of ganja in India ranged from 3/8 to 20 rupees per pound in 1893 4, when a rupee was worth about $0.30. In today's dollars, this translates to between $2.75 and $150 per pound, consistent with the authors' low-ball cost estimates. Modern costs would probably be higher due to more advanced production techniques. The cost of a regular habit was estimated at one to six pice per day, a pice (1/64 rupee) being the smallest coin in circulation 5. Despite the low cost of hemp drugs, the Commission observed only modest rates of consumption in India. Regular users constituted ≤ 1% of the population in every region except Calcutta, where they numbered 5.4% 6. It is noteworthy that Bengal and other states prohibited private cultivation and limited possession in order to prevent illicit diversion. Therefore legalization did not eliminate cannabis-related crime: in 1892–93, Bengal reported 407 arrests for ganja offenses 7. The historical example of India proves the viability of legal cannabis regulation. However, it does not provide final answers to the questions raised by Caulkins et al. which must be re-addressed in the context of modern American culture. This work received no outside funding, and the author is not connected to the tobacco, alcohol, pharmaceutical or gaming industries or any organization substantially funded by them.

Investigating the Influential Factors on Purchase Intention the ‘Gray Market’ Goods in South-East of Iran

One of the main challenges that many of the international markets activists confront, is the phenomenon of ‘gray market’. Regarding the necessity of knowing and controlling this kind of market, the present study has tried to discuss and examine those factors that affects on consumers tendency toward purchasing gray market goods in the south-eastern of Iran. The chosen method of research for this study is a descriptive one based on field survey. The society that has been looked through involved a group of 502 consumers from the south-eastern cities of Iran, chosen randomly. This study is based on structural equations model and for examining the relations between variables and testing hypotheses, after collecting data and information through questionnaires, the AMOS18 and SPSS17 software programs have been used. The results of research indicate that variables such as: price consciousness, perceived risk, perceived value and inference of ‘price-quality’ through attitude, all influence on the consumer’s purchase intention. Besides, the variables like consumption dependency, status consumption and social expenses have direct effects on this attitude. Key words: Gray market; Consumer’s behavior; Iran

The "Gray Market" Raises Concerns about Cost, Safety, and Ethics

The "Gray Market" Raises Concerns about Cost, Safety, and Ethics

A Prescription for Drug Shortages

THE ACCELERATING USE OF GENERIC DRUGS, WHICH now account for 70% or more of prescriptions in the United States, has been greeted with great approbation. But the lack of market forces in the highly regulated pharmaceutical industry is resulting in a worrisome trend—shortages of drugs are occurring with increasing frequency. In the last few years, the shortages are no longer limited to orphan drugs but have begun to affect familiar medications that play a central role in current treatment. On October 31, 2011, President Obama signed an executive order allowing the US Food and Drug Administration (FDA) broader latitude in its efforts to contain drug shortages. But the problem is complex and will not be easily remedied. In 2005, the Center for Drug Evaluation and Research reported 62 drug shortages, defined by the FDA as “a situation in which the total supply of all clinically interchangeable versions of an FDA-regulated drug is inadequate to meet the current or projected demand at the patient level.” There were 157 shortages in 2009, including 72 shortages of sterile injectables. By 2010, the number of shortages had increased to 178, with 132 shortages affecting sterile injectables. This number was already exceeded by the end of the third quarter of 2011, and some predictions are between 200 and 300 drug shortages by the end of 2011. An increasing percentage of the drugs in short supply is in the category of older, generic “sterile injectables,” which includes intravenous medications used for chemotherapy or for anesthesia. Approximately 75% of the shortages in 2010 were in this group. The process of manufacturing sterile injectable drugs is complicated. The FDA attributed more than 50% of the shortages of sterile injectables in 2010 to issues with product quality (presence of particulates, microbial contamination, impurities, and crystallization). A shortage of the anesthetic propofol, only recently resolved, developed when 2 of the 3 manufacturers were affected by product recalls— Hospira, for particulate matter, and Teva, for possible microbial contamination. Similarly, the recall and resultant shortage of cytarabine (Ara-C) was related to a product quality issue of crystal formation. Because there is no substitute for cytarabine in protocols for acute myelogenous leukemia (AML), unavailability of this drug presented major problems for oncologists and their patients. However, it was found that the crystals dissolved if the vial containing cytarabine was warmed, and the FDA subsequently permitted use of available product with this advisory. Unlike propofol and cytarabine, which are made by multiple companies, many drugs are manufactured at one site by one company. In addition, drugs may have a single supplier of active pharmaceutical ingredient. Information about the sources of pharmaceutical ingredients is proprietary, but an estimated 80% of raw material for drug manufacturing comes from foreign countries. Thus, the supply chain can be quite tenuous and it is only sluggishly responsive to changes in demand. Hospitals and outpatient surgical centers have been the first affected by the shortages of sterile injectables. Premier Healthcare Alliance surveyed 228 hospitals in the second half of 2010 and found that 80% of them had experienced shortages that led to “delay or cancellation of patient care intervention.” Attempts to work around a shortage are fraught with hazard. When hospitals substituted etomidate for propofol, at least 8 cases of phlebitis were documented. Instances of multiple use of single-use vials of propofol led to contamination and infection with hepatitis C in Nevada. There were 9 deaths in Alabama due to bacterial contamination of hand-mixed total parenteral nutrition products when the sterile premix was unavailable. In the case of chemotherapy, there are often no reasonable substitutes for the drugs in short supply. There were 23 chemotherapy shortages in 2010 and there were already 22 shortages by August 2011, according to the Hematology/Oncology Pharmacy Association. The National Cancer Institute has been forced to place some studies on hold, and individual patients have experienced interruptions in their treatment cycles. It is tempting to resort to “gray market” vendors of drugs, but the drugs they offer at substantial markups have an unknown provenance, a very risky situation. The common denominator for problems with these drugs is that they are older, off patent, difficult to formulate, and have a defined shelf life. “Just-in-time” inventory control

Prices gone wild: Grey market ‘scalpers’ scoring windfall in American drug market

Imagine a world where prices have gone completely haywire, spiking more than, say, 600%. A cup of coffee for $13? Gas at $7 a litre? Such is the plight of many hospitals and other health care providers in the United States as they grapple with extraordinary markups for vital drugs they can’t get

Consumer Lifestyle Matters: Evidence from Gray Markets in China

Consumers are at the central point of marketing. However, while existential research is devoted to understanding gray market, little attention is given to the consumer’s view of gray market. This study attempts to take the perspective of consumers to address the gray market issue. Lifestyles of the target customers of trademark holders are proposed for trademark holders to retain existing customers while simultaneously attracting new customers from the gray market. We perform Cluster analysis to identify different customer groups by using “lifestyle” as a market segmentation variable. ANOVA, Scheffe test and regression analyses are then employed to test the proposed hypotheses. Analytical results reveal that the different customer groups exhibit particular lifestyle features, different perceptions of gray product quality as well as different purchase intentions.

The Impact of Buyers on Salespersons’ Ethical Judgment and Behavioral Intention to Practice Gray Marketing

ABSTRACT The purpose of this article is to explore how the behavior of buyers in business-to-business markets influences the behavior of salespeople toward gray marketing practices. With the salespersons as participants, the authors examine the impact of two buyers’ factors—buyers’ asking for gray benefits and order size—on salespersons’ ethical evaluation of, and behavioral intention to practice, gray marketing. We found that buyers’ asking for gray benefits and offering bigger orders have negative impacts on salespersons’ perceived unethicalness of gray marketing, which in turn increases their behavioral intention to practice gray marketing. We also found that these two factors have a direct and indirect impact on salespersons’ behavioral intention to practice gray marketing.

Underpricing of Initial Public Offerings in Indian Capital Market

This paper is an attempt to empirically explore the determinants of underpricing of Initial Public Offerings (IPOs) in the Indian Capital Market. IPOs are one of the largest sources of capital for the firms to invest in the growth opportunities. It encourages investment activities in the economy by mobilizing funds from low growth opportunities to high growth opportunities. It has been observed that IPOs are underpriced in most of the countries (Loughran, Ritter and Rydqvist 1994). Underpricing is the pricing of the issue at lesser price than the true value of the issue. The degree of underpricing varies from country to country and issue to issue in the same country. The underpriced IPO leaves money on the table which is a cost (loss of capital) for the company and the same becomes a gain for the investors in the form of positive initial returns on the underpriced shares. Though underpricing is a cost for the issuing company, the issuing company underprices the issue. There are many theoretical explanations for underpricing of IPOs. This is an empirical study which aims to find out the factors which are causing underpricing in India. The underpricing of IPOs is a serious problem for any economy. On the one hand, high underpricing tendency in the primary market discourages IPOs issued by those companies which cannot afford or do not want underpricing (leaving money on the table). On the other hand, it creates arbitrage activities in the secondary market and in the grey market. The underpricing of IPOs thus hampers the growth opportunities and creates instability in the secondary market. In India, introduction of book building mechanism of IPOs in 1998 aimed to reduce underpricing because in the book building mechanism, offer price of the issue is determined on the basis of market feedback. The present study on 227 book-built IPOs for the period of 2004 to 2009 found that the average underpricing during this period was 28 per cent while the maximum underpricing was around 242 per cent. Thus underpricing of IPOs is still an issue of concern.

Controlling Power Retailer's Gray Activities Through Contract Design

We develop a model that captures dynamic relationships of a supply chain populated by a dominant retailer and a number of fringe retailers. The two types of retailers are asymmetric in buying power, retailing cost, and the ability to service the manufacturer's product. The wholesale prices offered through a quantity discount (QD) schedule can coordinate such a supply chain, but invite channel flow diversion type of gray trading between the dominant retailer and the fringe retailers. Our analysis is focused on how such a channel can be coordinated and the gray market activities be prevented. We propose a dynamic QD contract or a revenue‐sharing contract that the manufacturer can use to fight the gray market activity. The performance of the supply chain and the manufacturer's profit under each of the two contract forms are compared and managerial guidelines are provided to help the manufacturer make a judicious choice.

ROPS Deficiency of Gray-Market Tractors

Many used tractors that are imported from Japan are adding to the current national inventory in the U.S. and Canada of farm tractors that lack a rollover protective structure (ROPS). Gray-market tractors are built for use by the manufacturer for a certain country but are imported against the manufacture's wishes to a second country for use there, usually as a used tractor. Gray-market tractors may lack ROPS and seatbelts, depending on the date of manufacturer. The objective of this investigation is to describe the gray market for tractors imported from Japan into the U.S. and the policy implications regarding the hazards associated with these imports. Operator manuals and warning labels are typically not written in English. Foreign manufacturers that market tractors in the U.S. have established a variety of disincentives for the importation of gray-market tractors, including issuing warnings, not servicing or providing parts for these tractors, and banning their importation through actions by the U.S. International Trade Commission. Nonetheless, a U.S. market has developed that imports and provides services and parts for gray-market tractors, and some companies provide certified ROPS on the tractors that they sell. A product safety perspective and related policies are presented as an approach to ensuring that these imports are equipped with ROPS and seatbelts.

Firm Quality or Market Sentiment: What Matters More for IPO Investors?

This paper investigates the investment decision of IPO investors when equipped with information on both the quality of the firm and the market sentiment. The unique regulatory provisions allow IPO investors in India to have access to the independent assessment of firm quality and information on the participation of other investors, including institutional investors. At the same time, an active grey market reveals market sentiment before the application for subscription is closed. The results, which are robust to alternative model specifications, suggest that the institutional investors’ decision is guided almost exclusively by firm quality while the retail investors’ decision to participate in IPOs is strongly influenced by the market sentiment even in a highly transparent market where both sets of information are freely available.

The Impact of Greek Labour Market Regulation on Temporary and Family Employment: Evidence from a New Survey

This paper uses an original dataset for 206 workplaces in Thessaly (Greece), to study consequences of Greece's employment protection law (EPL) and national wage minimum for temporary employment. We find higher temporary employment rates especially among a grey market group of workplaces that pay low wages and avoid the national wage minimum. A similar factor boosts family employment. We also find that EPL matters, in particular, managers who prefer temporary contracts because temps are less protected definitely employ more temps. We discuss whether temporary and family work is a form of escape from regulation for less prosperous firms.

Caveat oncologist: clinical findings and consequences of distributing counterfeit erythropoietin in the United States.

Counterfeit pharmaceuticals pose risks domestically. Because of their cost, cancer pharmaceuticals are vulnerable. We review findings from a domestic counterfeiting episode involving erythropoietin and outline anticounterfeiting recommendations for policy makers, patients, and health care professionals. Information was obtained on patients who received counterfeit erythropoietin, its distribution, and criminal investigations into counterfeiting networks. Interview sources included a physician, an attorney, employees of the Florida Department of Health and Human Services and the US Food and Drug Administration's (FDA) Office of Criminal Investigation, manufacturers, and wholesalers. Other sources included the book "Dangerous Doses," LexisNexis (search terms "counterfeit" and "erythropoietin") and the FDA database. Counterfeit product consisted of 2,000 U vials with counterfeit labels denoting 40,000 U. The counterfeiters, in collaboration with a Miami pharmacy, purchased 110,000 erythropoietin 2,000 U vials and affixed counterfeit labels to each vial. Products were then sold via the pharmaceutical "gray market" to wholesalers, then pharmacy chains. Investigations by Florida government officials implicated 17 persons, all of whom were found guilty of trafficking in counterfeit pharmaceuticals. Despite the large size of the operation, the FDA received reports of only 12 patients who had received counterfeit erythropoietin and detailed information for only two individuals. A 17-year-old liver transplant recipient and a 61-year-old patient with breast cancer experienced loss of efficacy after receiving counterfeit erythropoietin. Wider use of FDA anticounterfeit initiatives, limiting pharmaceutical suppliers to reputable distributors, and educating providers and patients about signs of counterfeit drugs can improve the safety of cancer pharmaceuticals.

Indonesia: Telling Lies

Indonesia: Telling Lies

Gray Markets and Multinational Transfer Pricing

ABSTRACT Gray markets arise when a manufacturer's products are sold outside of its authorized channels, for instance when goods designated by a multinational firm for sale in a foreign market are resold domestically. One method multinationals use to combat gray markets is to increase transfer prices to foreign subsidiaries in order to increase the gray market's cost base. We illustrate that, when a gray market competitor exists, the optimal transfer price to a foreign subsidiary exceeds marginal cost and is decreasing in the competitiveness of the domestic market. However, a multinational's discretion in setting transfer prices may be limited by mandatory arm's length transfer pricing rules. Provided gray markets exist, we characterize when mandating arm's length transfer pricing lowers domestic social welfare relative to unrestricted transfer pricing. We also demonstrate that gray markets can lead to higher domestic tax revenues, even when gray market firms do not pay taxes domestically.