Existence of gray markets lead 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 by providing legitimate distributors' investments in supporting a manufacturer's product less productive, as consumers have access to cheaper alternatives. This can ultimately harm the manufacturer's profitability and weaken the distribution channel.

Existence of Gray Markets Lead to Which of the Following