TY  - JOUR
AU  - Grossman,Gene M.
AU  - Shapiro,Carl
TI  - Counterfeit-Product Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1876
PY  - 1988
Y2  - December 1988
UR  - http://www.nber.org/papers/w1876
L1  - http://www.nber.org/papers/w1876.pdf
N1  - Author contact info:
Gene M. Grossman
International Economics Section
Department of Economics
Princeton University
Princeton, NJ 08544
Tel: 609/258-4823
Fax: 609/258-1374
E-Mail: grossman@princeton.edu

Carl Shapiro
Deputy Assistant Attorney General for Economics
U.S. Department of Justice, Antitrust Division
950 Pennsylvania Avenue
Washington, DC 20530
Tel: 202-514-0731
Fax: 202-514-0306
E-Mail: shapiro@haas.berkeley.edu
AB  - We analyze a two-country model of trade in both legitimate and counterfeit products. Domestic firms own trademarks and establish reputations for delivering high-quality products in a steady-state equilibrium. Foreign suppliers export legitimate low-quality merchandise and counterfeits of domestic brand-name goods. Heterogeneous home consumers either purchase low-quality imports or buy brand-name products, rationally expecting some degree of counterfeiting of the latter. We characterize a counterfeiting equilibrium and explore its properties. We describe the positive and normative effects of counterfeiting in comparison with a no-counterfeiting benchmark. Finally, we provide a welfare analysis of border inspection policy and of policy regarding the disposition of counterfeit goods that are confiscated at the border.
ER  -