Should non-genuine products be expelled from markets?

Keisuke Hattori and Keisaku Higashida

No 126, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We develop a model in which a `genuine' producer supplying genuine products competes with many `non-genuine' producers supplying the compatible third-party or generic products. We examine whether non-genuine products should be expelled from markets. In particular, we focus on the genuine producer's strategies for driving out non-genuine products: running comparative advertising, building technical barriers, and improving the quality of genuine products. Although the small amount of spending on advertising or building technical barriers improves social welfare, their equilibrium amounts are socially excessive. The quality improvement may raise or reduce welfare, depending on the degree of patent protection. We also find that prohibition of entry of non-genuine producers may improve welfare by discouraging the genuine producer from implementing the drive-out strategies.

Keywords: Genuine products; advertising; technical barriers; anti-trust law (search for similar items in EconPapers)
JEL-codes: L13 L15 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-03, Revised 2015-03
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:126

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