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Free-Riding and Luxury Brands on the Internet

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  • Olivier Bomsel

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

Luxury is a complex industrial activity whose products combine strong vertical differentiation and a meaning value for the consumer. Luxury offers experiences, the economy of which is based on signalling. This gives rise to intense intangible investment internalized by trademark law and vertical restraints in distribution. However, the extent of the added value and the power of externalities associated with communication generate many sources of free-riding. Using the tools of industrial economics, this article analyses how the digitization of information and transactions creates new forms of free-riding in relation to luxury brands. Identifying vertical disintegration as a major source of free-riding, it calls for improved internalization of the enforcement of trademark law by all players in the digital value chain.

Suggested Citation

  • Olivier Bomsel, 2014. "Free-Riding and Luxury Brands on the Internet," Post-Print hal-01110929, HAL.
    • Handle: RePEc:hal:journl:hal-01110929
    DOI: 10.5539/ibr.v7n3p60
    Note: View the original document on HAL open archive server: https://hal.science/hal-01110929v1
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    References listed on IDEAS

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    1. Rey, Patrick & Tirole, Jean, 1986. "The Logic of Vertical Restraints," American Economic Review, American Economic Association, vol. 76(5), pages 921-939, December.
    2. Richard Watt, 2000. "Copyright and Economic Theory," Books, Edward Elgar Publishing, number 2023.
    3. H. Leibenstein, 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(2), pages 183-207.
    4. Olivier Bomsel & Heritiana Ranaivoson, 2009. "Decreasing Copyright Enforcement Costs: The Scope of a Gradual Response," Post-Print hal-00446189, HAL.
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    Cited by:

    1. Da HUO & Yan CHEN & Ken HUNG & Rihui OUYANG & Baowen SUN & Yinghui CAI, 2019. "Quality Management of E-business: A Key Node Analysis of Ecological Network in Digital Economy by Using Artificial Intelligence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 166-179, June.

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    Keywords

    Free-riding; Luxury Brands;

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