European Journal of Law and Economics

, Volume 36, Issue 1, pp 169–182 | Cite as

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

Article

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.

Keywords

Aspirational effect Counterfeiting Luxury Snob 

JEL Classifications

D21 D23 D42 

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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Université de SousseSousseTunisie
  2. 2.Montpellier SupAgro and LAMETA, UMR1135Montpellier Cedex 1France

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