The Role of Anticounterfeit Technology in Combating Counterfeit Products

32 Pages Posted: 16 Jan 2019 Last revised: 20 Feb 2019

See all articles by Shiqing Yao

Shiqing Yao

Monash Business School, Monash University

Kaijie Zhu

The Chinese University of Hong Kong (CUHK)

Date Written: December 20, 2018

Abstract

Counterfeits cause tremendous damages to brand companies by eroding market shares and reducing customers' willingness to pay. Realizing such problem, many brand companies develop and deploy anticounterfeit technologies to prevent counterfeiters from imitating their products. In this paper, we consider an authentic company which sells its product to a market where a counterfeiter may imitate the genuine one. To combat counterfeiting, the authentic company develops its anticounterfeit technology, helping customers distinguish its genuine product from the fake. We find that in the presence of counterfeiting activities, an authentic company may choose to offer, from its spectrum of product qualities, a relatively low product quality or a very high quality, but not some quality level in-between. Our analysis further indicates that, in equilibrium, the anticounterfeit effort exerted by the authentic company does not necessarily decrease in the penalty levied by the authority, even though they serve the same purpose. In addition, we explore two possible measures that may help increase the authentic company's profit. The first is committing itself to anticounterfeit effort and the second is proactive cooperation with regulatory authority. We find committing to anticounterfeit effort can always make the authentic company better off but may increase the occurrence of counterfeiting. On the contrary, proactive cooperation with the regulatory authority can help reduce counterfeiting but may decrease the authentic company's profit as well.

Keywords: Deceptive counterfeits, anticounterfeit technology, legal action, proactive cooperation

Suggested Citation

Yao, Shiqing and Zhu, Kaijie, The Role of Anticounterfeit Technology in Combating Counterfeit Products (December 20, 2018). Available at SSRN: https://ssrn.com/abstract=3315767 or http://dx.doi.org/10.2139/ssrn.3315767

Shiqing Yao

Monash Business School, Monash University ( email )

Monash Business School
27 Sir John Monash Drive
Melbourne, Victoria 3145
Australia

Kaijie Zhu (Contact Author)

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Register to save articles to
your library

Register

Paper statistics

Downloads
65
Abstract Views
409
rank
350,586
PlumX Metrics