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Foreign Counterfeiting of Status Goods

Foreign Counterfeiting of Status Goods Abstract We study the positive and normative effects of counterfeiting, i.e., trademark infringement, in markets where consumers are not deceived by forgeries. Consumers are willing to pay more for counterfeits than for generic merchandise of similar quality because they value the prestige associated with brand-name trademarks. Counterfeiters of status goods impose a negative externality on consumers of genuine items, as fakes degrade the status associated with a given label. But counterfeits allow consumers to unbundle the status and quality attributes of the brand-name products, and alter the competition among oligopolistic trademark owners. We analyze two policies designed to combat counterfeiting: enforcement policy which increases the likelihood of confiscation of illegal items, and the imposition of a tariff on low-quality imports. * This research was undertaken while the authors were supported by the Alfred P. Sloan Foundation as Sloan Research Fellows. We also acknowledge support from the National Science Foundation under Grant No. SES-8606336, and from the International Labor Affairs Bureau, U. S. Department of Labor under Contract No. B9K63043. We thank Larry Summers for comments on an earlier draft. This content is only available as a PDF. © 1988 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Quarterly Journal of Economics Oxford University Press

Foreign Counterfeiting of Status Goods

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References (13)

Publisher
Oxford University Press
Copyright
© 1988 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
ISSN
0033-5533
eISSN
1531-4650
DOI
10.2307/1882643
Publisher site
See Article on Publisher Site

Abstract

Abstract We study the positive and normative effects of counterfeiting, i.e., trademark infringement, in markets where consumers are not deceived by forgeries. Consumers are willing to pay more for counterfeits than for generic merchandise of similar quality because they value the prestige associated with brand-name trademarks. Counterfeiters of status goods impose a negative externality on consumers of genuine items, as fakes degrade the status associated with a given label. But counterfeits allow consumers to unbundle the status and quality attributes of the brand-name products, and alter the competition among oligopolistic trademark owners. We analyze two policies designed to combat counterfeiting: enforcement policy which increases the likelihood of confiscation of illegal items, and the imposition of a tariff on low-quality imports. * This research was undertaken while the authors were supported by the Alfred P. Sloan Foundation as Sloan Research Fellows. We also acknowledge support from the National Science Foundation under Grant No. SES-8606336, and from the International Labor Affairs Bureau, U. S. Department of Labor under Contract No. B9K63043. We thank Larry Summers for comments on an earlier draft. This content is only available as a PDF. © 1988 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Journal

The Quarterly Journal of EconomicsOxford University Press

Published: Feb 1, 1988

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