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Why Branded Firm may Benefit from Counterfeit Competition

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  • Ding, Yucheng

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.

Suggested Citation

  • Ding, Yucheng, 2014. "Why Branded Firm may Benefit from Counterfeit Competition," MPRA Paper 52933, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:52933
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    References listed on IDEAS

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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Counterfeits; Coase Conjecture; Quality Signaling;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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