Untangling Searchable and Experiential Quality Responses to Counterfeits

Yi Qian, Qiang Gong, Yuxin Chen

NBER Working Paper No. 18784
Issued in February 2013
NBER Program(s):Productivity, Innovation, and Entrepreneurship

In this paper, we untangle the searchable and experiential dimensions of quality responses to entry by counterfeiters in emerging markets with weak intellectual property rights. Our theoretical framework analyzes the market equilibria under competition with non-deceptive counterfeiting and deceptive counterfeiting, respectively, as well as under monopoly branding. A key theoretical prediction is that emerging markets can be self-corrective with respect to counterfeiting issues in the following sense: First, counterfeiters could earn positive profits by pooling with authentic brands only when consumers have good faith in the market (believe in a low probability that any product is a counterfeit). When the proportion of counterfeits in the market exceeds a cutoff value, brands would invest in self-differentiation from the competitive fringe counterfeiters. Second, to attain a separating equilibrium with counterfeiters, branded incumbents upgrade the searchable quality (e.g. appearance) of their products more and improve the experiential quality (e.g. functionality) less, as compared to monopoly equilibrium. This prediction uncovers the nature of product differentiation in the searchable dimension and helps in analyzing the real-world innovation strategies employed by authentic firms in response to entries by counterfeit entities. In addition, the welfare analyses hint at a non-linear relationship between social welfare and intellectual property enforcement.

download in pdf format
   (183 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18784

Published: Untangling Searchable and Experiential Quality Responses to Counterfeits Yi Qian, Qiang Gong, and Yuxin Chen Marketing Science 201534:4 , 522-538

Users who downloaded this paper also downloaded* these:
Qian w17849 Brand Management and Strategies Against Counterfeits
Kottelenberg and Lehrer w22126 Targeted or Universal Coverage? Assessing Heterogeneity in the Effects of Universal Childcare
Qian w16785 Counterfeiters: Foes or Friends? How Do Counterfeits Affect Different Product Quality Tiers?
Allen, Qian, Zhang, and Zhao w17828 China's Financial System: Opportunities and Challenges
Druz, Wagner, and Zeckhauser w20991 Tips and Tells from Managers: How Analysts and the Market Read Between the Lines of Conference Calls
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us