An Alternative Framework for Empirically Measuring the Size of Counterfeit Markets

36 Pages Posted: 22 Jun 2012

See all articles by Rosalie Liccardo Pacula

Rosalie Liccardo Pacula

Health Economics, Finance and Organization, RAND Corporation; National Bureau of Economic Research (NBER)

Srikanth Kadiyala

RAND Corporation

Priscillia Hunt

RAND Corporation

Alessandro Malchiodi

affiliation not provided to SSRN

Date Written: June 2012

Abstract

This paper develops a new method for estimating trends in the size of counterfeit markets. The method draws on principles of microeconomic theory and uses aggregated product-level data to estimate counterfeiting activities in various geographic markets. Using confidential firm unit forecasts and actual sales information, a two stage approach is employed that first accounts for unexpected but observable factors that could lead to forecasting error and then, in the second stage, considers the influence of market susceptibility to IPR infringement. Data are analysed for 45 related products sold by a single firm operating in 16 countries during the period 2006-2011. Our models predict larger amounts of counterfeiting in countries with higher corruption norms, lower government control and effectiveness. Predictions of the level of counterfeiting obtained from the second stage are then compared to estimates of counterfeiting derived internally by the firm using shadow-shopping methods. While our two stage model generally under-predicts the level of counterfeiting in each year, it generates trends in counterfeiting that are broadly consistent with those obtained using more costly and intensive methods.

Suggested Citation

Pacula, Rosalie Liccardo and Kadiyala, Srikanth and Hunt, Priscillia and Malchiodi, Alessandro, An Alternative Framework for Empirically Measuring the Size of Counterfeit Markets (June 2012). NBER Working Paper No. w18171. Available at SSRN: https://ssrn.com/abstract=2089244

Rosalie Liccardo Pacula (Contact Author)

Health Economics, Finance and Organization, RAND Corporation ( email )

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National Bureau of Economic Research (NBER)

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Srikanth Kadiyala

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Priscillia Hunt

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Alessandro Malchiodi

affiliation not provided to SSRN ( email )

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