Foreign Counterfeiting of Status Goods
The authors study the positive and normative effects of counterfeiting, i.e., trademark infringement, in markets where cons umers are not deceived by forgeries. Consumers are willing to pay mor e for counterfeits than for generic merchandise of similar quality be cause they value the prestige associated with brand-name trademarks. Counterfeiters of status goods impose a negative externality on consu mers of genuine items, as fakes degrade the status associated with a given label. But counterfeits allow consumers to unbundle the status and quality attributes of the brand-name products and alter the compe tition among oligopolistic trademark owners. The authors analyze two policies designed to combat counterfeiting: enforcement policy which increases the likelihood of confiscation of illegal items, and the im position of a tariff on low-quality imports. Copyright 1988, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 103 (1988)
Issue (Month): 1 (February)
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