An Alternative Framework for Empirically Measuring the Size of Counterfeit Markets
AbstractThis paper develops a new method for estimating trends in the size of counterfeit markets. The method draws on principles of microeconomic theory and uses aggregated product-level data to estimate counterfeiting activities in various geographic markets. Using confidential firm unit forecasts and actual sales information, a two stage approach is employed that first accounts for unexpected but observable factors that could lead to forecasting error and then, in the second stage, considers the influence of market susceptibility to IPR infringement. Data are analysed for 45 related products sold by a single firm operating in 16 countries during the period 2006-2011. Our models predict larger amounts of counterfeiting in countries with higher corruption norms, lower government control and effectiveness. Predictions of the level of counterfeiting obtained from the second stage are then compared to estimates of counterfeiting derived internally by the firm using shadow-shopping methods. While our two stage model generally under-predicts the level of counterfeiting in each year, it generates trends in counterfeiting that are broadly consistent with those obtained using more costly and intensive methods.
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Date of creation: Jun 2012
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Find related papers by JEL classification:
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-01 (All new papers)
- NEP-FOR-2012-07-01 (Forecasting)
- NEP-IUE-2012-07-01 (Informal & Underground Economics)
- NEP-PBE-2012-07-01 (Public Economics)
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