Counterfeit Product Trade

Gene Grossman

No 103, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyze a two-country model of trade in both legitimate and counterfeit products. Domestic firms own trademarks and establish reputations for delivering high-quality products in a steady-state equilibrium. Foreign suppliers export legitimate low-quality merchandise and counterfeits of domestic brand-name goods. Heterogeneous home consumers either purchase low-quality imports or buy brand-name products, rationally expecting some degree of counterfeiting of the latter. We characterize a counterfeiting equilibrium and explore its properties. We describe the positive and normative effects of counterfeiting in comparison with a no-counterfeiting benchmark. Finally, we provide a welfare analysis of border inspection policy and of policy regarding the disposition of counterfeit goods that are confiscated at the border.

Keywords: Counterfeiting; Reputation; Trademarks (search for similar items in EconPapers)
Date: 1986-04
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Counterfeit-Product Trade (1988)
Working Paper: Counterfeit-Product Trade (1986)
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