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Impacts of Entry by Counterfeiters

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  • Yi Qian

    (Kellogg School of Management, Northwestern University)

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    Abstract

    This paper uses a natural experiment to test the impact of counterfeiting under weak intellectual property rights. I collect new panel data from Chinese shoe companies from 1993-2004. By exploiting the discontinuity of government enforcement efforts for the footwear sector in 1995 and the differences in authentic companies' relationships with the government, I identify and measure the effects of counterfeit entry on authentic prices, qualities, and other market outcomes. The results show that brands with less government protection differentiate their products through innovation, self-enforcement, vertical integration of downstream retailers, and subtle high-price signals. These strategies push up authentic prices and are effective in reducing counterfeit sales. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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    Bibliographic Info

    Article provided by MIT Press in its journal Quarterly Journal of Economics.

    Volume (Year): 123 (2008)
    Issue (Month): 4 (November)
    Pages: 1577-1609

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    Handle: RePEc:tpr:qjecon:v:123:y:2008:i:4:p:1577-1609

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00335533

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    Cited by:
    1. Leung, Tin Cheuk & Ng, Travis & Ho, Chun-Yu & Chao, Hong, 2013. "To Root or Not to Root? The Economics of Jailbreak," MPRA Paper 47409, University Library of Munich, Germany.
    2. Tin Cheuk Leung, 2013. "What Is the True Loss Due to Piracy? Evidence from Microsoft Office in Hong Kong," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1018-1029, July.
    3. Berger, Florian & Blind, Knut & Cuntz, Alexander, 2012. "Risk factors and mechanisms of technology and insignia copying—A first empirical approach," Research Policy, Elsevier, vol. 41(2), pages 376-390.
    4. Ding, Yucheng, 2014. "Why Branded Firm may Benefit from Counterfeit Competition," MPRA Paper 52933, University Library of Munich, Germany.
    5. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2011. "Does Price Reveal Poor-Quality Drugs? Evidence from 17 Countries," NBER Working Papers 16854, National Bureau of Economic Research, Inc.
    6. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2012. "Counterfeit or Substandard? Assessing Price and Non-Price Signals of Drug Quality," NBER Working Papers 18073, National Bureau of Economic Research, Inc.
    7. Sheng, Shibin & Zhou, Kevin Zheng & Lessassy, Leopold, 2013. "NPD speed vs. innovativeness: The contingent impact of institutional and market environments," Journal of Business Research, Elsevier, vol. 66(11), pages 2355-2362.

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