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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
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    References listed on IDEAS

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