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Duopoly competition with non-deceptive counterfeiters

Author

Listed:
  • Wu, Chien-Wei
  • Gong, Jyh-Chyi
  • Chiu, Hsien-Hung

Abstract

This paper considers that two differentiated branded firms compete in the Hotelling's framework and face outside competition from non-deceptive counterfeiters. The presence of counterfeit goods gives rise to two various effects on branded firms’ profit: on the one hand, it undermines the sale of branded goods (substitution effect); on the other hand, it alleviates the intensity of price competition between branded firms (price increasing effect). We argue that, under certain circumstances, the price increasing effect may dominate the substitution effect, thereby boosting the branded firms’ profits. We also discuss the impact of the strength of intellectual property right (IPR) enforcement on the price and profit of the branded firms. The discussion may shed light on a long-standing debate on criminalizing the purchase of counterfeit goods.

Suggested Citation

  • Wu, Chien-Wei & Gong, Jyh-Chyi & Chiu, Hsien-Hung, 2016. "Duopoly competition with non-deceptive counterfeiters," International Review of Law and Economics, Elsevier, vol. 47(C), pages 33-40.
    • Handle: RePEc:eee:irlaec:v:47:y:2016:i:c:p:33-40
    DOI: 10.1016/j.irle.2016.04.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Counterfeit goods; Intellectual property right; Product differentiation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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