IDEAS home Printed from https://ideas.repec.org/a/eee/japwor/v24y2012i4p283-291.html
   My bibliography  Save this article

A model of counterfeiting: A duopoly approach

Author

Listed:
  • Tsai, Ming-Fang
  • Chiou, Jiunn-Rong
  • Lin, Chun-Hung A.

Abstract

This paper establishes a duopoly model, which considers consumers’ preference exhibits the horizontal differentiation and vertical differentiation simultaneously, to investigate how counterfeiting affects firms’ market power and consumer's purchasing behavior. The effects of government enforcement on counterfeiting are also concerned. The findings tell that (1) the market power of the firms is higher than the one when consumers with only the characteristic of horizontal differentiation or vertical differentiation; (2) when the production cost of a genuine product increases, the consumers who originally purchased this genuine product may continue to purchase the genuine one, purchase the genuine of the other brand, or, quite interestingly, purchase the counterfeiting product of the other brand; (3) If government imposes a (stricter) enforcement on counterfeiting, the consumers who do not have a strong preference on a particular brand of product but originally purchased the counterfeit of this brand of product may instead purchase the genuine one or purchase nothing; the consumers who originally purchased its genuine may instead purchase the genuine of the other brand or purchase nothing.

Suggested Citation

  • Tsai, Ming-Fang & Chiou, Jiunn-Rong & Lin, Chun-Hung A., 2012. "A model of counterfeiting: A duopoly approach," Japan and the World Economy, Elsevier, vol. 24(4), pages 283-291.
  • Handle: RePEc:eee:japwor:v:24:y:2012:i:4:p:283-291
    DOI: 10.1016/j.japwor.2012.06.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0922142512000473
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.japwor.2012.06.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    2. Banerjee, Dyuti & Chatterjee, Ishita, 2010. "The impact of piracy on innovation in the presence of technological and market uncertainty," Information Economics and Policy, Elsevier, vol. 22(4), pages 391-397, December.
    3. Cremer, Helmuth & Pestieau, Pierre, 2009. "Piracy prevention and the pricing of information goods," Information Economics and Policy, Elsevier, vol. 21(1), pages 34-42, February.
    4. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    5. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
    6. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-174, February.
    7. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    8. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    9. Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-246, April.
    10. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
    11. Gene M. Grossman & Carl Shapiro, 1986. "Foreign Counterfeiting of Status Goods," NBER Working Papers 1915, National Bureau of Economic Research, Inc.
    12. Fernando Nascimento & Wilfried R. Vanhonacker, 1988. "Optimal Strategic Pricing of Reproducible Consumer Products," Management Science, INFORMS, vol. 34(8), pages 921-937, August.
    13. Kiema, Ilkka, 2008. "Commercial piracy and intellectual property policy," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 304-318, October.
    14. Gene M. Grossman & Carl Shapiro, 1988. "Foreign Counterfeiting of Status Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 79-100.
    15. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
    16. Oz Shy & Jacques‐Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 163-190, June.
    17. Rosario Laratta (ed.), 2012. "Social Welfare," Books, IntechOpen, number 1876, September.
    18. Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-957, October.
    19. Higgins, Richard S & Rubin, Paul H, 1986. "Counterfeit Goods," Journal of Law and Economics, University of Chicago Press, vol. 29(2), pages 211-230, October.
    20. Yooki Park & Suzanne Scotchmer, 2004. "Digital Rights Management and the Pricing of Digital Products," Working Papers 04-09, NET Institute, revised Oct 2004.
    21. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    22. Banerjee, Dyuti S., 2006. "Lobbying and commercial software piracy," European Journal of Political Economy, Elsevier, vol. 22(1), pages 139-155, March.
    23. Dyuti S. Banerjee & Tanmoyee Banerjee (Chatterjee) & Ajitava Raychaudhuri, 2008. "Optimal Enforcement And Anti‐Copying Strategies To Counter Copyright Infringement," The Japanese Economic Review, Japanese Economic Association, vol. 59(4), pages 519-535, December.
    24. Choi, Pilsik & Bae, Sang Hoo & Jun, Jongbyung, 2010. "Digital piracy and firms' strategic interactions: The effects of public copy protection and DRM similarity," Information Economics and Policy, Elsevier, vol. 22(4), pages 354-364, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marta Biancardi & Andrea Liddo & Giovanni Villani, 2020. "Fines Imposed on Counterfeiters and Pocketed by the Genuine Firm. A Differential Game Approach," Dynamic Games and Applications, Springer, vol. 10(1), pages 58-78, March.
    2. Andrea Di Liddo, 2018. "Does counterfeiting benefit genuine manufacturer? The role of production costs," European Journal of Law and Economics, Springer, vol. 45(1), pages 81-125, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ming-Fang Tsai & Jiunn-Rong Chiou, 2012. "Counterfeiting, enforcement and social welfare," Journal of Economics, Springer, vol. 107(1), pages 1-21, September.
    2. Jen-Te Yao, 2005. "Counterfeiting and an Optimal Monitoring Policy," European Journal of Law and Economics, Springer, vol. 19(1), pages 95-114, January.
    3. Choi, Pilsik & Bae, Sang Hoo & Jun, Jongbyung, 2010. "Digital piracy and firms' strategic interactions: The effects of public copy protection and DRM similarity," Information Economics and Policy, Elsevier, vol. 22(4), pages 354-364, December.
    4. Dyuti Banerjee, 2011. "On the sufficiency of regulatory enforcement in combating piracy," Journal of Regulatory Economics, Springer, vol. 40(2), pages 160-176, October.
    5. Banerjee, Dyuti, 2013. "Effect of piracy on innovation in the presence of network externalities," Economic Modelling, Elsevier, vol. 33(C), pages 526-532.
    6. Tunay I. Tunca & Qiong Wu, 2013. "Fighting Fire with Fire: Commercial Piracy and the Role of File Sharing on Copyright Protection Policy for Digital Goods," Information Systems Research, INFORMS, vol. 24(2), pages 436-453, June.
    7. Chang, Yang-Ming & Walter, Jason, 2015. "Digital piracy: Price-quality competition between legal firms and P2P network hosts," Information Economics and Policy, Elsevier, vol. 31(C), pages 22-32.
    8. Cho, Won-Young & Ahn, Byong-Hun, 2010. "Versioning of information goods under the threat of piracy," Information Economics and Policy, Elsevier, vol. 22(4), pages 332-340, December.
    9. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    10. Jean-Jacques Herings, P. & Peeters, Ronald & Yang, Michael S., 2010. "Competition against peer-to-peer networks," Information Economics and Policy, Elsevier, vol. 22(4), pages 315-331, December.
    11. Dyuti S. Banerjee & Teyu Chou, 2007. "Copyright Protection And Innovation In The Presence Of Commercial Piracy," Monash Economics Working Papers 05-07, Monash University, Department of Economics.
    12. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo.
    13. Kogan, Konstantin & Ozinci, Yaacov & Perlman, Yael, 2013. "Containing piracy with product pricing, updating and protection investments," International Journal of Production Economics, Elsevier, vol. 144(2), pages 468-478.
    14. Kresimir Zigic & Jiri Strelicky & Michal Kunin, 2020. "Private and Public IPR Protection in a Vertically Differentiated Software Duopoly," CERGE-EI Working Papers wp671, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    15. Arun Sundararajan, 2003. "Managing Digital Piracy: Pricing, Protection and Welfare," Law and Economics 0307001, University Library of Munich, Germany.
    16. Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
    17. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
    18. Yeh-ning Chen & Ivan Png, 2003. "Information Goods Pricing and Copyright Enforcement: Welfare Analysis," Information Systems Research, INFORMS, vol. 14(1), pages 107-123, March.
    19. Yao, Jen-Te, 2015. "The impact of counterfeit-purchase penalties on anti-counterfeiting under deceptive counterfeiting," Journal of Economics and Business, Elsevier, vol. 80(C), pages 51-61.
    20. Rick Harbaugh & Rahul Khemka, 2010. "Does Copyright Enforcement Encourage Piracy?," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 306-323, June.

    More about this item

    Keywords

    Vertical differentiation; Horizontal differentiation; Counterfeiting; Enforcement policy;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:japwor:v:24:y:2012:i:4:p:283-291. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/inca/505557 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505557 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.