Paper accepted at Annuals of Operations Research

💰 Global Pricing Strategy Alert: Are you trying to stop the Grey Market? You might be fighting the wrong battle.

Multinational corporations often struggle to enforce price differentiation across countries, leading to Parallel Trade (the “grey market”). While this unofficial trade can be detrimental to individual Local Business Units (LBUs), our new research (with Yuan-Mao Kao, Yang Yang, and Cheng-Hung Wu) delivers a surprising insight:

💡 The existence of parallel trade can actually lead to higher overall corporate profit.

💡 The Key Takeaway for Business Leaders: Instead of costly efforts to eliminate parallel trade, MNCs should strategically leverage it. Parallel trade allows your products to reach different consumer segments at varied price points — effectively achieving better market segmentation.

💡 Your Strategy Shift: Focus on optimizing your internal transfer pricing policies and empowering your LBUs to set dynamic, region-specific retail prices. This calculated approach, supported by an efficient game-theoretic model tested on the FMCG industry, can turn a perceived threat into a competitive advantage.

It’s time to stop fighting the grey market and start managing it.

🔗 Official publication in the Annuals of Operations Research: Link
🔗 Preprint: Link