A model of counterfeiting: A duopoly approach

Ming Fang Tsai, Jiunn Rong Chiou, Chun Hung A. Lin

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

This paper establishes a duopoly model, which considers consumers’ preference exhibits the horizontal differentiation and vertical differentiation simultaneously, to investigate how counterfeiting affects firms’ market power and consumer's purchasing behavior. The effects of government enforcement on counterfeiting are also concerned. The findings tell that (1) the market power of the firms is higher than the one when consumers with only the characteristic of horizontal differentiation or vertical differentiation; (2) when the production cost of a genuine product increases, the consumers who originally purchased this genuine product may continue to purchase the genuine one, purchase the genuine of the other brand, or, quite interestingly, purchase the counterfeiting product of the other brand; (3) If government imposes a (stricter) enforcement on counterfeiting, the consumers who do not have a strong preference on a particular brand of product but originally purchased the counterfeit of this brand of product may instead purchase the genuine one or purchase nothing; the consumers who originally purchased its genuine may instead purchase the genuine of the other brand or purchase nothing.

Original languageEnglish
Pages (from-to)283-291
Number of pages9
JournalJapan and the World Economy
Volume24
Issue number4
DOIs
StatePublished - 1 Dec 2012

Keywords

  • Counterfeiting
  • Enforcement policy
  • Horizontal differentiation
  • Vertical differentiation

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