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How a luxury monopolist might benefit from the aspirational utility effect of counterfeiting?

Author

Listed:
  • Insaf Bekir

    (USO - جامعة سوسة = Université de Sousse = University of Sousse)

  • Sana El Harbi

    (USO - جامعة سوسة = Université de Sousse = University of Sousse)

  • Gilles Grolleau

    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier, Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)

Abstract

Thanks to an intertemporal analytical model, we incorporate aspirational consumers in Veblen markets for luxury fashion items. We show how a luxury monopolist can increase its profits thanks to the presence of counterfeit products. The genuine producer profit is shaped by two opposite effects: (1) a positive aspirational effect resulting from a sales increase due to the aspirational consumers who seek to imitate the lifestyle of snob consumers (2) a negative snob effect, resulting from a sales decrease due to the reduction of consumption by some snob consumers. We identify the conditions under which the overall effect generated by counterfeiting can increase the genuine firm profit. These conditions imply the existence of large aspirational effects and high additional utility gain associated with buying an original product instead of obtaining a counterfeit product.

Suggested Citation

  • Insaf Bekir & Sana El Harbi & Gilles Grolleau, 2013. "How a luxury monopolist might benefit from the aspirational utility effect of counterfeiting?," Post-Print hal-01506025, HAL.
    • Handle: RePEc:hal:journl:hal-01506025
    DOI: 10.1007/s10657-011-9235-x
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    Cited by:

    1. Wu, Chien-Wei & Gong, Jyh-Chyi & Chiu, Hsien-Hung, 2016. "Duopoly competition with non-deceptive counterfeiters," International Review of Law and Economics, Elsevier, vol. 47(C), pages 33-40.
    2. Srivastava, Abhinav & Mukherjee, Srabanti & Jebarajakirthy, Charles, 2020. "Aspirational consumption at the bottom of pyramid: A review of literature and future research directions," Journal of Business Research, Elsevier, vol. 110(C), pages 246-259.
    3. Pittiglio, Rosanna, 2024. "Counterfeiting and firm survival. Evidence from the Italian manufacturing industry," Economic Systems, Elsevier, vol. 48(2).
    4. Bian, Xuemei & Wang, Kai-Yu & Smith, Andrew & Yannopoulou, Natalia, 2016. "New insights into unethical counterfeit consumption," Journal of Business Research, Elsevier, vol. 69(10), pages 4249-4258.
    5. Butticè, Vincenzo & Caviggioli, Federico & Franzoni, Chiara & Scellato, Giuseppe & Stryszowski, Piotr & Thumm, Nikolaus, 2020. "Counterfeiting in digital technologies: An empirical analysis of the economic performance and innovative activities of affected companies," Research Policy, Elsevier, vol. 49(5).

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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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