Author: Yucheng Ding, Xu Guan, Jiannan Ke

Abstract: This article investigates competition between a branded firm selling a durable good over two periods and a deceptive counterfeiter entering the market in the second period. The two firms engage in a price signaling game in which the branded firm designs its price strategy over two periods, and strategic consumers decide whether to buy the authentic product upfront or wait until the second period. We find that the branded firm may benefit from the counterfeit competition if the quality gap between the two products is sufficiently large. The intuition is that the branded firm would charge a high second-period price to signal its authenticity, inducing more consumers to buy the genuine product upfront. This strategy allows the branded firm to increase its first-period price and demand simultaneously, thus effectively mitigating the time-inconsistency problem. Otherwise, when the quality gap is small, counterfeit competition leads to reduced profits for the authentic product. These results remain robust throughout several extensions of the base model, including partially informed or naive consumers, asymmetric retail channels, post-purchase regret, and endogenized counterfeit.

Keywords: Deceptive counterfeit, Strategic consumer, Signaling game, Time-inconsistency

本文2024年4月在线发表于Production and Operations Management。该期刊为UTD24之一，属于经济与管理学院学术期刊分级方案A级奖励期刊。丁宇澄为本文第一作者，柯剑男为通讯作者。This article was published online in April 2024 in "Production and Operations Management." This journal is one of the UTD24 and is a Level A reward journal in the academic journal ranking scheme of the Economics and Management School of Wuhan University. Yucheng Ding is the first author of this article, and Jiannan Ke is the corresponding author.

Link: https://doi.org/10.1177/10591478241252149