Abstract

http://ssrn.com/abstract=2030317
 


 



Piracy versus Monopoly in the Market for Conspicuous Consumption


Michael Mandler


University of London, Royal Holloway College - Department of Economics

June 2014


Abstract:     
When luxury purchases signal the incomes of buyers, a monopoly will deliver signals efficiently. If competitors sell counterfeit copies of luxury goods at low prices, consumers will have to buy larger quantities to transmit the same signal, which wastes resources. Entrants do maximal harm when they produce indistinguishable replicas of existing luxury goods which causes prices to fall the furthest. Pooling, where agents do not signal, can deliver a welfare improvement over the separation that occurs under classical monopoly and competition. But only a powerful monopoly that can determine which goods are marketed can enforce this outcome. Finally, there is a trade-off among the goods that can serve as income signals: the goods that signal efficiently display a large gap between between marginal cost and the price a monopoly charges, but the same goods offer the greatest rewards to counterfeiting.

Number of Pages in PDF File: 34

Keywords: conspicuous consumption, piracy, separation, pooling

JEL Classification: D11, D42, D82, H21, L10

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Date posted: March 29, 2012 ; Last revised: July 22, 2014

Suggested Citation

Mandler, Michael, Piracy versus Monopoly in the Market for Conspicuous Consumption (June 2014). Available at SSRN: http://ssrn.com/abstract=2030317 or http://dx.doi.org/10.2139/ssrn.2030317

Contact Information

Michael Mandler (Contact Author)
University of London, Royal Holloway College - Department of Economics ( email )
Royal Holloway College
University of London
Egham, Surrey TW20 0EX
United Kingdom
+44 1784 443985 (Phone)
HOME PAGE: http://personal.rhul.ac.uk/uhte/035/
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