Counterfeit-Product Trade

Gene Grossman and Carl Shapiro

No 1876, NBER Working Papers from National Bureau of Economic Research, Inc

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.

Date: 1986-03
Note: ITI IFM
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Citations: View citations in EconPapers (15)

Published as American Economic Review, Vol. 78, No. 1, March 1988, pp. 59-75.

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