A model of counterfeiting: A duopoly approach

Ming-Fang Tsai (), Jiunn-Rong Chiou and Chun-Hung A. Lin

Japan and the World Economy, 2012, vol. 24, issue 4, 283-291

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.

Keywords: Vertical differentiation; Horizontal differentiation; Counterfeiting; Enforcement policy (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:24:y:2012:i:4:p:283-291

DOI: 10.1016/j.japwor.2012.06.001

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