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Why Branded Firm May Benefit from Counterfeit Competition
2014
Social Science Research Network
A durable good monopolist sells its branded product over two periods. In period 2, when there is entry of a counterfeiter, the branded firm may charge a high price to signal its quality. Counterfeit competition thus enables the branded firm to commit to high future price in period 2, alleviating the classic time-inconsistency problem under durable good monopoly. This can increase the branded firm's profit by encouraging consumer purchase without delay, despite the revenue loss to the
doi:10.2139/ssrn.2380927
fatcat:fcsovi75lfewrfi44kdzypql4i