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Piracy versus Monopoly in the Market for Conspicuous Consumption

Economic Journal, Forthcoming

27 Pages Posted: 29 Mar 2012 Last revised: 30 Sep 2016

Michael Mandler

University of London, Royal Holloway College - Department of Economics

Date Written: July 2016

Abstract

When luxury purchases signal the incomes of buyers, a monopoly will deliver signals efficiently. If in contrast competitors sell counterfeit copies of luxury goods at low prices, consumers will have to buy larger quantities or higher qualities to transmit the same signals, which wastes resources. Competition does maximal harm when entrants produce indistinguishable replicas of existing luxury goods since prices will fall the furthest. The delivery of signals presents a trade-off: goods with a large gap between marginal cost and the price a monopoly would charge signal efficiently but those large gaps increase the reward to counterfeiting.

Keywords: conspicuous consumption, piracy, separation

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

Suggested Citation

Mandler, Michael, Piracy versus Monopoly in the Market for Conspicuous Consumption (July 2016). Economic Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2030317 or http://dx.doi.org/10.2139/ssrn.2030317

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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