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Laboratory markets in counterfeit goods: Hong Kong versus Las Vegas

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  • Patrick Harvey
  • W. David Walls

Abstract

“Black markets” represent an extreme challenge to empirical researchers due to the almost insurmountable obstacle of obtaining high-quality data. The dearth of high-precision data precludes not only empirical analysis—including the quantification of various elasticities—but also the informed policy analysis that results from the integration of empirical results with government, market, and social institutions. We propose and conduct a controlled laboratory market in counterfeit goods on several groups of subjects in Hong Kong and Las Vegas. The data generated in the experiments are used to estimate a random-effects model of individual choice behavior. The main empirical findings are that subjects in Hong Kong are more likely to purchase the counterfeit good than are subjects in Las Vegas; the price and penalty elasticities are substantially larger (in absolute value) in Las Vegas than in Hong Kong; and that in both locations the price effects of legitimate and counterfeit goods are asymmetrical in the monetary price and expected penalty cost. An equal increase in the price of an authentic good and the expected penalty cost of a counterfeit good increases the probability that a consumer will purchase the authentic good.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 10 (2003)
Issue (Month): 14 ()
Pages: 883-887

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Handle: RePEc:taf:apeclt:v:10:y:2003:i:14:p:883-887

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  1. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
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Cited by:
  1. Franses, Ph.H.B.F. & Lede, M., 2012. "Income, Cultural Norms and Purchases of Counterfeits," Econometric Institute Research Papers EI 2012-26, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Swami, Viren & Chamorro-Premuzic, Tomas & Furnham, Adrian, 2009. "Faking it: Personality and individual difference predictors of willingness to buy counterfeit goods," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 820-825, October.
  3. Rosalie Liccardo Pacula & Srikanth Kadiyala & Priscillia Hunt & Alessandro Malchiodi, 2012. "An Alternative Framework for Empirically Measuring the Size of Counterfeit Markets," NBER Working Papers 18171, National Bureau of Economic Research, Inc.
  4. Muhammad Rizwan & Muhammad Nasir Jamal & Zain-Ul-Abidin & Khadeeja Gul Zareen & Arslan Khan & Barza Farhat & Rashid Khan, 2013. "The Determinants of Purchase Intention towards Counterfeit Mobile Phones in Pakistan," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(2), pages 220-236, February.
  5. Yoo, Boonghee & Lee, Seung-Hee, 2012. "Asymmetrical effects of past experiences with genuine fashion luxury brands and their counterfeits on purchase intention of each," Journal of Business Research, Elsevier, vol. 65(10), pages 1507-1515.

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