IDEAS home Printed from https://ideas.repec.org/a/kap/compec/v60y2022i4d10.1007_s10614-021-10195-6.html
   My bibliography  Save this article

How do Fines and Their Enforcement on Counterfeit Products Affect Social Welfare?

Author

Listed:
  • Marta Biancardi

    (University of Bari)

  • Andrea Di Liddo

    (University of Foggia)

  • Giovanni Villani

    (University of Bari)

Abstract

We consider a differential game which models the competition between a genuine and a counterfeit producer. The genuine manufacturer acts as a leader, first announcing the price of the product and the investments in advertising. After observing the leader’s decisions, the counterfeiter sets the selling price of the fakes. We assume that the demand of the good is driven by the brand-name goodwill. We calculate the Stackelberg feedback equilibria and the social welfare, defined by the unweighted sum of the genuine and fakes consumers, the profit of the genuine firm, minus the enforcement costs borne by the social planner. The purpose of this paper is twofold. Firstly we study the dependence of social welfare on the amount of the fines established in the IPR law and monitoring efforts. Then, we compare prices, profits and social welfare under Nash and Stackelberg framework.

Suggested Citation

  • Marta Biancardi & Andrea Di Liddo & Giovanni Villani, 2022. "How do Fines and Their Enforcement on Counterfeit Products Affect Social Welfare?," Computational Economics, Springer;Society for Computational Economics, vol. 60(4), pages 1547-1573, December.
  • Handle: RePEc:kap:compec:v:60:y:2022:i:4:d:10.1007_s10614-021-10195-6
    DOI: 10.1007/s10614-021-10195-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10614-021-10195-6
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s10614-021-10195-6?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. Jehoshua Eliashberg & Abel P. Jeuland, 1986. "The Impact of Competitive Entry in a Developing Market Upon Dynamic Pricing Strategies," Marketing Science, INFORMS, vol. 5(1), pages 20-36.
    2. Pohjola, Matti, 1983. "Nash and stackelberg solutions in a differential game model of capitalism," Journal of Economic Dynamics and Control, Elsevier, vol. 6(1), pages 173-186, September.
    3. 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.
    4. 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.
    5. Grossman, Gene M & Shapiro, Carl, 1988. "Counterfeit-Product Trade," American Economic Review, American Economic Association, vol. 78(1), pages 59-75, March.
    6. Jie Zhang & L. Hong & Rachel Zhang, 2012. "Fighting strategies in a market with counterfeits," Annals of Operations Research, Springer, vol. 192(1), pages 49-66, January.
    7. Sana El Harbi & Gilles Grolleau & Insaf Bekir, 2014. "Substituting piracy with a pay-what-you-want option: does it make sense?," European Journal of Law and Economics, Springer, vol. 37(2), pages 277-297, April.
    8. Hu, Yinan & Guan, Yongpei & Liu, Tieming, 2011. "Lead-time hedging and coordination between manufacturing and sales departments using Nash and Stackelberg games," European Journal of Operational Research, Elsevier, vol. 210(2), pages 231-240, April.
    9. Martín-Herrán, Guiomar & Taboubi, Sihem & Zaccour, Georges, 2012. "Dual role of price and myopia in a marketing channel," European Journal of Operational Research, Elsevier, vol. 219(2), pages 284-295.
    10. 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.
    11. Reza Ahmadi & B. Rachel Yang, 2000. "Parallel Imports: Challenges from Unauthorized Distribution Channels," Marketing Science, INFORMS, vol. 19(3), pages 279-294, March.
    12. Gene M. Grossman & Carl Shapiro, 1988. "Foreign Counterfeiting of Status Goods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 79-100.
    13. 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.
    14. A. J. Novak & G. Feichtinger & G. Leitmann, 2010. "A Differential Game Related to Terrorism: Nash and Stackelberg Strategies," Journal of Optimization Theory and Applications, Springer, vol. 144(3), pages 533-555, March.
    15. Steffen Jørgensen & Simon-Pierre Sigué & Georges Zaccour, 2001. "Stackelberg Leadership In A Marketing Channel," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 13-26.
    16. Andrea Di Liddo, 2019. "Competition in the Presence of Counterfeiters: The Case of Fines Imposed on Counterfeiters and Pocketed by the Genuine Firm," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 1-26, December.
    Full references (including those not matched with items on IDEAS)

    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. 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. Wang, Yingjia & Lin, Jiaxin & Choi, Tsan-Ming, 2020. "Gray market and counterfeiting in supply chains: A review of the operations literature and implications to luxury industries," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    3. 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.
    4. Jen-Te Yao, 2005. "Counterfeiting and an Optimal Monitoring Policy," European Journal of Law and Economics, Springer, vol. 19(1), pages 95-114, January.
    5. Yuetao Gao, 2018. "On the Use of Overt Anti-Counterfeiting Technologies," Marketing Science, INFORMS, vol. 37(3), pages 403-424, May.
    6. Hu, Shu & Fu, Ke & Wu, Tong, 2021. "The role of consumer behavior and power structures in coping with shoddy goods," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    7. Li, Zhiwen & Xu, Xianhao & Bai, Qingguo & Guan, Xu & Zeng, Kuan, 2021. "The interplay between blockchain adoption and channel selection in combating counterfeits," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    8. Crettez, Bertrand & Hayek, Naila & Zaccour, Georges, 2018. "Brand imitation: A dynamic-game approach," International Journal of Production Economics, Elsevier, vol. 205(C), pages 139-155.
    9. Keisuke Hattori & Keisaku Higashida, 2023. "Who should be regulated: Genuine producers or third parties?," Journal of Economics, Springer, vol. 138(3), pages 249-286, April.
    10. He, Chao & Tan, Chunqiao & Ip, W.H. & Wu, C.H., 2023. "Combating counterfeits with the Blockchain-technology-supported platform under government enforcement," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    11. Wagner, Laura & Gürbüz, Mustafa Ҫagri & Parlar, Mahmut, 2019. "Is it fake? Using potentially low quality suppliers as back-up when genuine suppliers are unavailable," International Journal of Production Economics, Elsevier, vol. 213(C), pages 185-200.
    12. Zhang, Jie & Zhang, Rachel Q., 2015. "Supply chain structure in a market with deceptive counterfeits," European Journal of Operational Research, Elsevier, vol. 240(1), pages 84-97.
    13. Meng Li & Suresh P. Sethi & Jun Zhang, 2016. "Competing with bandit supply chains," Annals of Operations Research, Springer, vol. 240(2), pages 617-640, May.
    14. 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.
    15. Soo-Haeng Cho & Xin Fang & Sridhar Tayur, 2015. "Combating Strategic Counterfeiters in Licit and Illicit Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 273-289, July.
    16. 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.
    17. Bate, Roger & Jin, Ginger Zhe & Mathur, Aparna, 2011. "Does price reveal poor-quality drugs? Evidence from 17 countries," Journal of Health Economics, Elsevier, vol. 30(6), pages 1150-1163.
    18. Nikolaus Thumm & Vincenzo Butticè & Federico Caviggioli & Chiara Franzoni & Giuseppe, Scellato, 2018. "Impact of counterfeiting on the performance of digital technology companies," JRC Working Papers on Digital Economy 2018-03, Joint Research Centre.
    19. Benhamou, Francoise & Ginsburgh, Victor, 2006. "Copies of Artworks: The Case of Paintings and Prints," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 8, pages 253-283, Elsevier.
    20. Jie Zhang & L. Hong & Rachel Zhang, 2012. "Fighting strategies in a market with counterfeits," Annals of Operations Research, Springer, vol. 192(1), pages 49-66, January.

    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:kap:compec:v:60:y:2022:i:4:d:10.1007_s10614-021-10195-6. See general information about how to correct material in RePEc.

    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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.