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

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  • Insaf Bekir
  • Sana El Harbi
  • Gilles Grolleau

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. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Insaf Bekir & Sana El Harbi & Gilles Grolleau, 2013. "How a luxury monopolist might benefit from the aspirational utility effect of counterfeiting?," European Journal of Law and Economics, Springer, vol. 36(1), pages 169-182, August.
    • Handle: RePEc:kap:ejlwec:v:36:y:2013:i:1:p:169-182
    DOI: 10.1007/s10657-011-9235-x
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    References listed on IDEAS

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    1. Stan Liebowitz, 2005. "Economists’ Topsy-Turvy View of Piracy," Law and Economics 0505002, University Library of Munich, Germany.
    2. Sana El Harbi & Gilles Grolleau, 2008. "Profiting from Being Pirated by ‘Pirating’ the Pirates," Kyklos, Wiley Blackwell, vol. 61(3), pages 385-390, August.
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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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    More about this item

    Keywords

    Aspirational effect; Counterfeiting; Luxury; Snob; D21; D23; D42;
    All these keywords.

    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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