Economic Journal, Forthcoming
27 Pages Posted: 29 Mar 2012 Last revised: 30 Sep 2016
Date Written: July 2016
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: 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