Counterfeiting and Consumption Externalities - A Closer Look

Jonas Häckner () and Astri Muren ()

No 2012:2, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: Counterfeiting of trademarked products is an increasing problem in national and international trade. We contribute to the analysis of how counterfeiting affects markets by extending the work of Grossman and Shapiro (1988a) on consumption externalities in prestige good markets. We model a general aversion towards large levels of output (denoted prestige externalities) interacting with a firm-specific aversion towards the presence of copies in particular (pirate externalities). The framework is used to examine several policy-relevant questions. First, we examine how market prices depend on these externalities and provide conditions for counterfeiting as an equilibrium outcome. Second, we compare market outcomes to outcomes in otherwise identical markets that are not subject to prestige externalities. Third, we describe how the substitutability between copies and originals are related to prestige- and pirate externalities respectively. Fourth, we compare market prices to prices chosen by a benevolent social planner. Finally, we re-visit some policy issues previously discussed in the literature.

Keywords: consumption externalities; counterfeiting; product differentiation (search for similar items in EconPapers)
JEL-codes: D62 L13 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-01-25
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www2.ne.su.se/paper/wp12_02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2012_0002

Access Statistics for this paper

More papers in Research Papers in Economics from Stockholm University, Department of Economics Department of Economics, Stockholm, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Anne Jensen ( this e-mail address is bad, please contact ).