Existence of gray markets leads to which of the following outcomes?
A) They make the distribution channel stronger.
B) They create a free-rider problem making legitimate distributors' investments in supporting a manufacturer's product less productive.
C) Goods sold in grey markets are always counterfeit.
D) Goods sold in grey markets come with standard product warranties.
E) Taxes imposed on grey market products are very high.

Question

Quizplus · Accepted Answer

Gray markets create a free-rider problem, where legitimate distributors' investments in supporting a manufacturer's product become less productive as some customers buy their products through gray market channels instead. This reduces the incentives for legitimate distributors to invest in supporting the manufacturer's product.

Existence of Gray Markets Leads to Which of the Following