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A model of counterfeiting: A duopoly approach

Author

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  • 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
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    References listed on IDEAS

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    1. repec:kap:ejlwec:v:45:y:2018:i:1:d:10.1007_s10657-015-9509-9 is not listed on IDEAS

    More about this item

    Keywords

    Vertical differentiation; Horizontal differentiation; Counterfeiting; Enforcement policy;

    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

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