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a) What is a gray market? Discuss why they exist and what problems they create from a manufacturer's point of view. Also, give specific examples (real or hypothetical) to illustrate what a marketer can do to combat gray marketing.

b) What is price escalation and why does it occur? Give a numerical example of how price escalation might happen for a U.S. exporter of headphones. Recommend some steps that might be possible to reduce price escalation.

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