Why Branded Firm may Benefit from Counterfeit Competition

Yucheng Ding

MPRA Paper from University Library of Munich, Germany

Abstract: A durable good monopolist sells its branded product over two periods. In period 2, when there is entry of a counterfeiter, the branded firm may charge a high price to signal its quality. Counterfeit competition thus enables the branded firm to commit to high future price in period 2, alleviating the classic time-inconsistency problem under durable good monopoly. This can increase the branded firm's profit by encouraging consumer purchase without delay, despite the revenue loss to the counterfeiter. Total welfare can also increase, because early purchase eliminates delay cost and consumers enjoy the good for both periods.

Keywords: Counterfeits; Coase Conjecture; Quality Signaling (search for similar items in EconPapers)
JEL-codes: D82 L11 L13 (search for similar items in EconPapers)
Date: 2014-01-10
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-ind, nep-ipr, nep-pr~ and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/116339/1/MPRA_paper_52933.pdf revised version (application/pdf)

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