id="para0001">We establish a model where a manufacturer sells goods in two markets and the delegated retailer may potentially sell in a gray market.
id="para0002">We show that the manufacturer can use rebates to deter the gray market (parallel importation).
id="para0003">Consumer rebates are beneficial to the manufacturer and possibly to retailer.
id="para0004">Partial redemption of rebates is not always a blessing to the manufacturer.
id="para0005">Rebate leakage or rebate under-valuation by consumers is not always a bad thing to the retailer.