PARALLEL IMPORTS, MARKET SIZE AND INVESTMENT INCENTIVE

This paper proposes a vertical control model that features two-part tariff pricing, leader-fringe-follower competition, and investment to characterize the conditions under which parallel imports will (or will not) occur when such activities are legally permitted. In addition, we analyze the effects of parallel imports on the incentive of an authorized distributor to invest in market development. We find that parallel imports cannot arise if the target and the source market either differ too greatly or are too similar in size. Two results are worth emphasizing. First, parallel imports can arise even if the IP owner has the ability to deter parallel imports. Second, the presence of parallel imports and even the threat posed by parallel imports can reduce the domestic distributor's market development investment.

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Optimal Promotional Effort Policy in Innovation Diffusion Model Incorporating Dynamic Market Size in Segment Specific Market

International Journal of Mathematical Engineering and Management Sciences ◽

10.33889/ijmems.2020.5.4.055 ◽

2020 ◽

Vol 5 (4) ◽

pp. 682-696

Author(s):

Sunita Mehta ◽

Kuldeep Chaudhary ◽

Vijay Kumar

Keyword(s):

Market Segmentation ◽

Solution Procedure ◽

Control Model ◽

Market Size ◽

Target Market ◽

Rate Parameter ◽

Promotional Effort ◽

Segmented Market ◽

Optimal Dynamic ◽

Promotional Strategies

Due the increasing globalization of market and diverse consumer groups, market segmentation becomes an ever more important concept in current market scenario. After market segmentation, firms use the available promotional strategies to target market. In this paper, we present a model of determining the optimal dynamic promotional policies for a product in segmented market incorporating dynamic market size, where sales is assumed to be evolved through mass and differentiated promotion. Mass promotional effort is allowed in whole market with a fixed spectrum for each segment while differentiated promotion is targeted to each segment independently. The optimal promotional effort policy for each segment is obtained by applying maximum principle. Numerical illustrations are provided to show the effectiveness of the proposed method and solution procedure by discretizing the optimal control model. Furthermore, sensitivity analysis of the discount rate parameter is carried out and presented.

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