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Cutting too Close? Design Protection and Innovation in Fashion Goods

  • Petal Jean Hackett
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    Continued lobbying by high-end, American designers for intellectual property-type fashion design protection has culminated in the proposed Innovative Design Protection and Piracy Prevention Act, intended to introduce EU standards. Using a sequential, 2-firm, vertical differentiation framework, we analyze the effects of protection on investment in innovative designs by high-quality (‘designer’) and lower-quality (‘mass-market’) firms when the mass-marketer may opt to imitate, consumers prefer trendsetting designs and firms compete in prices. We show that design protection, by transforming mass-marketers from imitators to innovators, may reduce both designer profits and welfare. The model provides possible explanations for the dearth of EU case law and the increase in designer/mass-marketer collaborations.

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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3716.

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    Date of creation: 2012
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    Handle: RePEc:ces:ceswps:_3716
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