Counterfeiters: Foes or Friends? How Do Counterfeits Affect Different Product Quality Tiers?

Yi Qian

No 16785, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A key concern about counterfeits and weak intellectual property protection is that they may hamper innovation by displacing legitimate sales. This paper combines a natural policy experiment with randomized lab experiments to estimate the heterogeneous impacts of counterfeiting on the sales and consumer purchase intent related to branded products of various quality levels. I collect new product-line-level panel data (1993-2004) on Chinese shoe companies. I identify heterogeneous effects of counterfeit entry on sales of authentic products of three quality tiers, finding that counterfeits have both advertising effects for a brand and substitution effects for authentic products, additionally the effects linger for some years. The advertising effect dominates the substitution effect for high-end authentic-product sales, and the substitution effect outweighs the advertising effect for low-end product sales. The positive effect of counterfeits is most pronounced for high-fashion products (such as women's high-leg boots and dress shoes), for shoes tailored to young customers, and for high-end products of brands not yet well-known at the time of counterfeiter entry.

JEL-codes: L25 L26 L6 (search for similar items in EconPapers)
Date: 2011-02
Note: IO PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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